Property insurance premiums for high-end homes, defined as those over $1 million, have dramatically increased since the pandemic. Michel Leonard of the Insurance Information Institute reports a 30% average premium increase for US homes over $1 million, while Weatherbys Hamilton notes a 20% rise in UK high-value home premiums in the past year alone. This surge is attributed to inflation driving up rebuilding costs and an increase in natural catastrophes like floods, storms, and wildfires. Insurers, reeling from large payouts and harder reinsurance market terms, are becoming more risk-averse, leading to more detailed questions, increased exclusions, and longer policy arrangement times. Some, like Allianz's Home & Legacy brand, have even exited the market.
Faced with these challenges, high-net-worth individuals are experiencing significant financial impacts. Jon McCosh, a Scottish estate manager, found his farmhouse was underinsured by approximately $144,000 after a fire, with the rebuilding cost estimated at $450,000 compared to the insured $306,000. His main residence's premium also jumped from $1,066 to $2,622 after a revaluation. Insurers are demanding more stringent conditions, such as requiring secure garaging for classic cars and specialist trackers for supercars, which some owners dislike due to privacy concerns. For historic and old buildings, especially those in disrepair or used for short-term rentals, obtaining coverage has become particularly difficult, with some premiums doubling or insurers requiring full-time staffing to increase security, adding an estimated $100,000 in annual costs for a $60,000 premium.
The insurance challenges extend beyond homes to valuable collections. One in four wealthy individuals increased spending on collectibles in 2021, with 5% of their wealth invested this way in 2022. Insurers are now scrutinizing authenticity more closely due to the rise of online purchases. Annual premiums for items like a $50 million art collection can range from $35,000 to $50,000, while a $5 million stable of racehorses might cost around $140,000 to insure. The increased costs and complex terms have led some, like Nicola Waite's supercar clients, to opt for only legally required coverage, and others, such as Kraft, to self-insure after experiencing theft and discovering coverage gaps. These conditions are prompting some wealthy individuals to seek alternative solutions, including commercial group policies, as traditional high-end home insurance becomes less accessible and more expensive.
