In today’s evolving risk landscape, proper insurance coverage isn’t just a safety net—it’s a crucial component of wealth preservation strategy. I recently sat down with Marc Gillette, a seasoned insurance broker from Fred C. Church, to explore the intricacies of property and casualty insurance for high-net-worth families. Our discussion revealed valuable insights about premium coverage options and emerging challenges that wealthy families need to consider in their risk management approach.
Note: This interview has been edited for clarity and length.
Q: Let’s start with the fundamentals. What truly sets premium carriers apart from standard insurance providers?
Marc: The distinction goes far beyond just higher coverage limits. Premium carriers fundamentally understand the unique lifestyle and needs of high-net-worth families. Let me give you a concrete example: Consider a home with custom millwork, imported marble, or a curated wine collection. Standard policies might only cover basic replacement costs, but premium carriers understand these unique features require specialized expertise to restore or replace.
With homeowners insurance specifically, premium carriers offer features that standard policies typically don’t touch. This includes guaranteed replacement cost, which means they’ll rebuild your home to its original specifications even if costs exceed the policy limit. They also offer agreed value options for precious items, cash settlement choices if you prefer not to rebuild, large loss deductible waivers, and even coverage for modern risks like identity theft and personal cyber protection.
What really distinguishes premium carriers is their proactive approach to risk management. They often provide complimentary home inspections, recommend qualified contractors, and offer guidance on protecting valuable collections. I’ve seen cases where premium carriers helped clients install water leak detection systems or upgrade security measures, potentially preventing catastrophic losses before they occur.
Perhaps most importantly, premium carriers provide a white glove claims experience that truly sets them apart. When a loss occurs, they assign dedicated claims adjusters who understand high-value properties and unique assets. These adjusters have smaller caseloads and the authority to make quick decisions, ensuring prompt resolution. They’ll coordinate directly with specialized contractors, arrange temporary accommodations at comparable properties, and handle all the details to restore your lifestyle as quickly as possible. This level of service becomes particularly valuable during widespread disasters when standard carriers might be overwhelmed with claims.
Q: With recent devastating wildfires in California and Colorado, how should homeowners think about fire coverage?
Marc: Fire coverage has become an increasingly critical concern, particularly in western states. We’re seeing insurance carriers either significantly raising rates or completely withdrawing from high-risk areas. This trend is forcing many homeowners to piece together coverage through multiple carriers or seek coverage through state-sponsored insurance pools, which often provide less comprehensive protection.
For high-value homes in fire-prone areas, premium carriers that do offer coverage typically require extensive preventive measures. This might include creating defensive space around the property, installing ember-resistant venting, using fire-resistant building materials, and maintaining sophisticated sprinkler systems. Some carriers even offer private firefighting services that can help protect homes during active wildfires.
It’s crucial to understand your policy’s specific fire coverage terms, as many policies have wildfire limitations, exclusions, or coverage caps that might leave you underprotected. Some policies might exclude wildfire altogether or have separate deductibles for wildfire events. Premium carriers typically offer guaranteed replacement cost coverage, which is essential given how construction costs can surge after widespread fire damage. They might also cover additional expenses like temporary relocation during rebuilding or smoke damage remediation, which standard policies might limit.
Q: We’re seeing an increase in catastrophic weather events nationwide. How should families approach coverage for these risks?
Marc: The frequency and severity of extreme weather events have increased dramatically across the country. We’re no longer just talking about regional risks – we’re seeing unprecedented weather patterns everywhere. Massive hailstorms are causing extensive damage in the Plains states, while deep freeze events are affecting homes as far south as Texas, where many properties weren’t built with such extreme cold in mind. The Atlantic hurricane season has become more active and destructive, with storms pushing further inland than historically typical. Even tornado activity is expanding beyond traditional “Tornado Alley.”
These events often expose coverage gaps in standard policies. For instance, many homeowners don’t realize that flood damage isn’t covered by standard policies, despite flooding being our most expensive natural disaster risk. Nearly 99% of U.S. counties have experienced flooding, yet flood insurance remains dramatically underutilized. After major storms, we often see cases where homeowners discover their policies don’t adequately cover things like auxiliary structures, debris removal, or temporary housing.
The flood insurance landscape has evolved significantly in recent years. Historically, the National Flood Insurance Program (NFIP) was the only option available to homeowners. Today, with expanding private flood markets, NFIP is just another option – and often not the best one for high-value homes. Private carriers frequently offer more comprehensive coverage, higher limits, and better terms than the NFIP.
For high-value homes, we strongly recommend working with brokers who can access both standard and excess markets to create comprehensive coverage. Premium carriers often offer significant advantages, including higher coverage limits and fewer restrictions than standard policies. They’re also more likely to cover additional living expenses if you need to relocate during repairs – which is particularly valuable for luxury properties where finding comparable temporary housing can be challenging. Some premium carriers even offer catastrophic response teams that can be deployed quickly after major events to help expedite recovery.
Q: When it comes to luxury vehicles, what special considerations should owners keep in mind?
Marc: High-end vehicle coverage needs to be as sophisticated as the cars themselves. Premium policies should include access to specialized repair shops that understand the intricacies of luxury vehicles. I’m talking about craftsmen who know how to handle exotic materials and complex electronics, not just general repair shops.
A comprehensive policy should guarantee the use of original manufacturer parts. This is crucial because using aftermarket parts on luxury vehicles can affect not just performance but also resale value. We also emphasize the importance of having agreed value coverage rather than actual cash value. This ensures that if your vehicle is totaled, you’ll receive the full agreed-upon value without depreciation.
Another often-overlooked aspect is rental car coverage. If your Ferrari needs repairs, a standard rental car won’t suffice. Premium policies should provide comparable luxury vehicles during repairs, which can take longer for high-end cars due to parts availability and specialized labor requirements.
Q: What about extended liability coverage? Why is it particularly crucial for wealthy families?
Marc: Excess liability coverage, or personal umbrella coverage, is arguably the most important protection for high-net-worth families in today’s litigious environment. Let me put this in perspective: a serious auto accident or an injury on your property could result in a lawsuit far exceeding your primary policy limits. Without adequate umbrella coverage, your personal assets and future income could be at risk.
We’re seeing more frequent high-value lawsuits these days, and the awards are getting larger. These claims can come from unexpected sources – social media posts leading to defamation claims, accidents involving household staff, or even cyber incidents affecting others’ privacy or financial security.
What makes umbrella coverage particularly valuable is that it often provides protection in areas your primary policies might not cover. For instance, it might cover legal defense costs for reputation damage or privacy breaches, which are increasingly common concerns for wealthy families. Additionally, some coverages that are often overlooked that can be added to an umbrella policy include uninsured/underinsured motorist coverage, uninsured/underinsured liability, and non-profit director and officers’ coverage. These extensions can be crucial for high-net-worth individuals who may serve on charitable boards or face increased exposure from uninsured drivers.
Q: Can you give me an interesting example of an extended liability claim that you worked on recently?
Marc: Here’s a recent case that illustrates the importance of adequate coverage: A family hosted their child’s graduation party, and during the celebration, a family friend’s child fell from an outdoor playset, resulting in permanent nerve damage. The injured child’s parents are now suing for the full policy limits of $3 million. This type of incident – a routine social gathering that turns into a major liability claim – perfectly demonstrates why robust excess coverage is essential. What might seem like a simple backyard get-together can quickly escalate into a multi-million-dollar lawsuit.
Q: What emerging challenges are you seeing in today’s insurance market, and how can families address them?
Marc: The single largest challenge we’re seeing today is non-weather related water losses in homes. Pressurized water leaks from plumbing systems, appliance failures, and deteriorating pipes are causing significant damage, often when properties are unoccupied. These losses have become so prevalent that many carriers now require automatic water shutoff systems, particularly for homes valued at $5 million or more and secondary properties that aren’t consistently occupied. These requirements make sense when you consider that a single burst pipe can cause hundreds of thousands in damage within hours.
Beyond water losses, insurance carriers are becoming increasingly selective about the properties they’ll cover, especially in high-risk areas like California, Colorado, and Montana. Climate change and increasing natural disasters have led to some carriers completely withdrawing from certain markets.
Cyber threats represent another growing concern. High-net-worth families are particularly attractive targets for cybercriminals due to their financial resources and often complex digital footprints. We’re seeing more sophisticated attacks targeting personal information, financial accounts, and even home security systems.
To address these challenges, we recommend a multi-faceted approach. Critical preventive measures include:
- Automatic water shutoff systems with leak detection
- Backup power generators to maintain system function during outages
- Comprehensive security systems
- Regular maintenance and updates for all critical home systems
- Cyber security measures for personal and home networks
It’s also worth considering higher deductibles to maintain reasonable premiums while ensuring robust coverage for major risks. Some families opt to self-insure for smaller claims while maintaining comprehensive coverage for significant exposures.
Q: What common mistakes should families make with their insurance coverage?
Marc: The biggest mistake is viewing insurance as a commodity and focusing solely on price. Insurance for high-net-worth families should be viewed as a sophisticated financial instrument that protects their lifestyle and legacy.
Another critical error is not reviewing coverage regularly. Asset values change, risk profiles evolve, and new coverage options emerge. I recommend annual reviews with your broker and wealth advisor, particularly after major life events or significant asset acquisitions.
Many families also underestimate their liability exposure. In today’s society, where social media can amplify personal disputes and litigation is increasingly common, having adequate excess liability coverage isn’t just about protecting current assets – it’s about safeguarding your family’s financial future.
Key Takeaways
- Premium carriers offer superior coverage and service specifically designed for high-net-worth families
- Regular coverage reviews are essential as risks and assets evolve
- Excess liability coverage is crucial for protecting current and future wealth
- Proactive risk management can help control insurance costs
- Working with experienced brokers who understand high-net-worth needs is essential
Need help reviewing your insurance coverage? Contact Wolf Pine Capital to schedule a consultation and ensure your assets are properly protected.
About the Expert:
Marc Gillette is a seasoned insurance broker at Fred C. Church, specializing in high-net-worth property and casualty insurance. With extensive experience in the industry, he helps families protect their assets through comprehensive insurance strategies.
Disclaimer: The content provided in this blog is for informational purposes only and should not be considered as financial, legal, or tax advice. Wolf Pine Capital does not guarantee the accuracy or completeness of any information provided herein. Please consult with a qualified professional regarding your specific situation before making any financial decisions. All investments involve risk, and past performance is no guarantee of future results.