Buying insurance is a bore. Ringing around or trawling the internet to find the cheapest policy is time consuming and frustrating - especially if you find you cannot beat your current insurer’s renewal offer.
If you are smart, you also stop and check the terms of any potential replacement policy you do find. There is no point buying a cheaper policy if it offers less cover. A new insurer is also an unknown quantity on the claims front: you will only find out from experience how tough it is when it comes to paying claims.
This is crucial if you have valuable jewellery, art or antiques, or even just a passion for Jimmy Choo shoes and Chanel suits. In that case, you should head straight for a specialist insurer such as Chubb, Hiscox or Zurich, preferably through a broker catering for wealthy people.
You will need to boast household contents worth at least £100,000 to £150,000 to register with these companies as a high net worth individual. Even then, they may turn you down if you have made frequent claims. Their policies have far fewer restrictions than standard policies, so they select customers who will not claim for every minor mishap.
You will probably also have to make up your mind to pay perhaps 10 per cent or 15 per cent more for the privilege of insuring with a specialist. But the extra cost reaps the reward of a big step up in cover, terms and service.
”Mass market household insurance has become a commodity. The insurers offer cheap premiums to win your business, but are tough on claims,” says Andrew Jobson, managing director at Aon Private Clients, a brokerage service.
He says the key difference between standard insurers and those in the high net worth market is how they handle claims. “High net worth insurers look for reasons to pay claims; standard insurers look for reasons not to.”
There are plenty of other differences. For a start, high net worth insurers do not impose warranties, which are security conditions you must agree to abide by under most standard policies. They usually involve making sure all windows and doors are locked and the burglar alarm set when you are out, and only leaving windows open at night in occupied bedrooms. You may have a claim rejected if, for example, someone breaks in through an unlocked window while you are out in the garden, or have just popped out to post a letter.
”We work on the basis that clients don’t want to get robbed, so we try and treat people like adults,” says Peter Welch of Hiscox.
They also visit the houses of people they insure, to help with valuation and to assess the risk they are taking on. “Most insurers just ask people to fill in a proposal form. We underwrite the client rather than the claim,” says John Sims of Chubb.
This enables a fast and efficient claims service. “Once a claim is agreed and settled, a cheque is generally issued within 24 hours,” says Jobson. And therein lies another crucial difference: high net worth insurers pay cash rather than supplying replacements for stolen or damaged items.
They pay on a new for old basis, with no reduction for wear and tear, as is common with standard insurers, particularly for clothes. They will pay for accidental damage - often an optional extra on standard policies, and provide worldwide all-risks cover, which means your mobile phone, your camera and your laptop computer are covered wherever you take them. Everything you possess is covered under a high net worth policy unless specifically excluded.
You are also in no danger of having your claim reduced if you have underinsured, which is a common failing. With a standard policy, you may only get £10,000 for a £20,000 claim if your insurer decides your contents are worth £60,000 rather than the £30,000 you insured them for.
High net worth insurers do not do this, mainly because they take steps to make sure you are not underinsured.
”The more you have to lose, the closer you should be looking at service and cover when you buy insurance, rather than just price,” says Bill Baker of specialist broker Porticus.
