Insurance is designed to protect you financially in case the worst happens. If you’ve accumulated significant assets, you may consider purchasing a high-net-worth insurance policy to cover your belongings and property. High-net-worth insurance, also known as high-value insurance, is designed for people who need coverage beyond what a standard policy might offer. Working with a financial advisor can help you get answers to what is the best insurance set up for your financial situation and long-term goals.
High-Net-Worth Definition
Net worth is the difference between your assets and debts. The term “high net worth” is used to describe someone who has an above-average net worth. According to the Federal Reserve’s most recent Survey of Consumer Finances (SCF), the median household net worth in the U.S. is $121,700 while the mean net worth is $748,800.
A high-net-worth individual (HNWI) is someone who has at least $1 million in liquid assets. The upper cap for high net worth is usually set at between $5 million and $10 million. Individuals with more than $10 million in assets may be classified as very high net worth, while ultra-high-net-worth individuals (UHNWI) typically have $50 million or more in liquid wealth.
What Is High-Net-Worth Insurance?
High-net-worth insurance or high-value insurance is coverage that’s designed for wealthy individuals and families. The coverage limits for this kind of insurance may be higher than your typical homeowners’ insurance policy. That’s meant to reflect the unique needs of those with a higher net worth.
A high-net-worth insurance policy can cover a variety of assets, including:
- First homes, second homes and vacation homes
- Rental properties
- Collectibles, heirlooms and antiques
- Fine jewelry
- Fine art
- Wine collections
- Vintage vehicles
- Motorcycles, RVs and golf carts
- Luxury vehicles
- Yachts and boats
High-value insurance can also include higher coverage limits for personal and professional liability.Policies can cover replacement costs for personal belongings, with higher limits for things like jewelry, antiques or artwork. If your home is destroyed by a covered event, your may guarantee coverage even if the cost exceeds policy limits.
High-value insurance policies can also offer special coverage options not always included in standard homeowners’ policies. For example, that might include coverage for:
- Flood-related losses
- Spoiled food caused by property damage or a power outage
- Damages caused by libel, slander or defamation
- Damages related to a kidnapping or ransom situation or extortion
In other words, this isn’t your run-of-the-mill insurance policy. But it’s something to consider if you live in a high-value home.
What Is a High-Value Home?
Generally speaking, a high-value home is one that’s valued at $750,000 or more. High-value homes may have special features or histories that set them apart from other homes.
For example, a historic home located in an upscale neighborhood that’s retained its original marble staircases and crystal chandeliers may be considered high value. Older homes that have been used as backdrops for film sets or count celebrities among previous owners could also be of high value.
With newer homes, some of the features that can add value include swimming pools, water features, state-of-the-art fixtures and upgraded amenities. Exterior buildings, such as a guest house or 30-car garage, can also help to increase what the home is worth.
Benefits of High-Net-Worth Insurance
There are some advantages associated with high-net-worth insurance that you don’t always get with regular homeowners’ insurance policies. Some of the benefits include:
- Higher coverage limits for belongings and liability
- Guaranteed replacement cost coverage
- Additional coverage to pay for living expenses if you’re temporarily unable to live in the home
- Medical bill coverage
- Coverage for business property
- Identity theft and fraud protection
- Coverage for flood or water damage
There is a caveat of course since you’ll pay more for these kinds of benefits. How much does high-net-worth insurance cost? The answer depends on several factors, including:
- Where the home is located
- How old it is
- Whether it has any distinction as a historical property
- The kinds of amenities the home has
- Whether there are any additional structures, such as a garage or pool house
- What kind of possessions are in the home and their value
According to the Insurance Information Institute, the average homeowner pays $1,272 in premiums for homeowners’ insurance. You may pay two to three times that amount or more for a high-net-worth policy, depending on your coverage limits.
Is High-Net-Worth Insurance the Same as Life Insurance?
When you’re talking about high-net-worth insurance, you’re usually talking about property insurance. High-value policies are primarily meant to cover things you own, such as homes or valuables.
Life insurance is a separate product that’s designed to cover you in the event that you pass away. In that case, the insurance company would pay out a death benefit to the beneficiary or beneficiaries named in the policy. They’d then be able to use that money as they see fit to cover living expenses and outstanding debts or pay funeral and burial costs.
Do you need life insurance if you have a high net worth? Even if you’re wealthy, life insurance can still be a valuable tool in your financial plan. You can use life insurance to add to your wealth if you’re accumulating cash value with your policy. Life insurance can also preserve more of your wealth for future generations once you pass away.
How to Buy High-Net-Worth Insurance
The first step in buying high-net-worth insurance is to determine whether you really need it, which will depend on your financial goals and current levels of protection.If you’ve determined that you need high-value insurance, the next step is figuring out what to include in your policy to make it as comprehensive as possible. You could ask your financial advisor for their advice but it’s also a good idea to speak with a high-value insurance specialist.
An insurance agent who’s well-versed in high-net-worth coverage can guide you through the different options and help you to build out a policy that meets your needs. You may want to speak with more than one agent, so you have multiple quotes to compare.
The Bottom Line
High-net-worth insurance isn’t something everyone needs but if you have a higher net worth, it’s important to protect your assets as well as you can. Understanding how this insurance works and what it’s meant to protect can help you to decide if it’s right for you. Your situation is going to be unique, though, so it’s important to make sure you consider how your assets and long-term planning impact any insurance decisions.
Financial Planning Tips
- Consider talking to your financial advisor about high-net-worth insurance and whether it’s something you should have. If you don’t have a financial advisor yet, finding one doesn’t have to be difficult. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Insurance is just one part of the puzzle when creating your financial plan. It’s also important to consider other elements, such as tax planning and estate planning. Creating a will, for example, is one of the most fundamental steps for ensuring that your assets are passed on to your heirs according to your wishes.
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