Why the High Net Worth Client Needs More than Just an Agent

What exactly is a high net worth client, also known as a “private client?”

According to Investopedia.com, a high net worth individual is an individual or family with liquid assets above a certain figure. Many sources set that figure at $1 million. Those people need insurance like the rest of us do, but not exactly like the rest of us do.

They need a homeowners policy, but they aren’t going to Lemonade on their smartphones for it.

They need a personal auto policy, but they aren’t going to make a 15-minute call to save 15%.

They have the same basic insurance needs as other insurance customers do, except that they are likely more complicated. Those insurance needs aren’t going to be met by any mobile app or cookie-cutter agent. They need someone who will act as their risk manager. They need an advisor, an advocate and an expert.

Think about property. Many customers own their primary home and that’s all. Some might even own a rental property or vacation property. High net worth individuals may own several properties, including their primary home, some rental properties, a vacation home and foreign properties.

It’s likely that when they purchased those properties, they didn’t do it in their own names. If they have rental properties, they might be owned by a Limited Liability Company (LLC) that the customer owns. Their homes could all be owned by a trust or family LLC. It’s possible that their primary residence includes a second dwelling, call it a guest house, or mother-in-law suite. That guest house may be on the same premises, but it may have its own address.

Once you deal with property ownership, you also must consider the homes themselves. Many insurance companies want to see exterior pictures of all sides of the house. That’s not going to do. You will need to make a physical inspection of the home, taking pictures of the specialized building materials. You may need to spend time collecting information about certain works of art, custom personal property, and artifacts.

Creating a building valuation for the size and quality of their primary home will be complicated. It will take time. Once you handle the main house, if there are out buildings, you’ll need to inspect those also. The ISO HO-3, and other homeowners’ policies based on it, will only allow for so large a limit for other structures. High net worth customers are likely to have out buildings that require a higher limit than these policies will allow.

Consider the exclusive neighborhood in my town that is built around a private airstrip. Every house in that community includes two garages; one large enough for two or three cars and the other is for the homeowner’s aircraft. This neighborhood has a restriction. You can only buy a house there if you own an airplane.

High net worth individuals have cars like the rest of us do, but not exactly like the rest of us. Many families have a car for every adult, or driver, in the family. At one time, my house had four cars that we owned.

These customers have daily use cars like we have. They may also have other vehicles such as exotics, classics, or antique vehicles. They may keep these vehicles for special occasions such as car shows and parades. They may not even drive any of them more than 100 miles in a year. They might take them to shows and events in other parts of their state, but they aren’t driving them. They may travel by trailer or car hauler. They may even have cars that they keep at their second home.

Think about exotic cars. These are vehicles that are in limited production, have a limited number available, or are customized so that they are more custom car than production model. Even these vehicles are often used for show or events. They tend to make lots of sound and draw the attention of the crowd.

Whether they are antique, custom, exotic or classic vehicles, they are valuable vehicles. Rather than depreciate over time (like most vehicles do), these high-value vehicles can appreciate. That makes the standard actual cash value insurance policy inappropriate for them. Their agent needs to be able to help them to choose between other valuation options, like stated value or agreed value.

Of course, just like the homeowners’ policies for these customers, there are carriers that specialize in dealing with their specialized exposures. High net worth customers don’t want an agent that can take orders. They want someone that can help them with their complex insurance purchases.