The high-net-worth (HNW) market is booming.
In 2014 alone, close to a million people around the world became new millionaires. In the United States, according to data released by Capgemini and RBC Wealth Management in 2015, the HNW community is collectively worth $16.2 trillion. By 2017, the wealth of HNW Americans will grow by 7%.
$16.2 trillion is an astounding number. Even after taxes and investments, that still leaves significant money for discretionary spending. For HNW individuals, that often means purchasing the latest technology, fine-art masterpieces, jewelry, yachts and vacation homes.
According to Barclays Wealth Insights, 9% of U.S. HNW individual assets are in “treasure assets,” such as antique furniture, fine art and jewelry. But as HNW individuals make these purchases, they may not recognize that they are exposing themselves to new, and often unfamiliar, risks.
The changing nature of their risk profile could leave HNW individuals exposed to significant out-of-pocket expenses in the event of an accident or injury.
Fortunately, there are steps they can take to protect themselves, their families and their lifestyle:
(Photo: iStock)
|The Internet of (your) things
The HNW community enjoys new gadgets and toys, be it a smart refrigerator, remote home monitoring or the latest wearable device. But in securing the latest and greatest before the average person, HNW individuals may have quickly morphed into high-profile targets for hackers.
Considering the fact that HNW individuals often have homes filled with valuable art and jewelry as well as well-funded bank accounts, it's easy to understand why they make such good targets. Fortunately, there are a variety of risk mitigation best practices HNW individuals can implement to protect themselves, starting with simply limiting the amount of personal information they share online.
It seems obvious, but changing passwords on a regular occurrence is a critical, but overlooked, best practice. The longer and more complex each password is, the safer you are. In other words, variations of your birthdate and last name simply won't cut it. Most importantly, make sure each device has its own unique password. The first step in the cyber thief playbook is to reuse passwords they've already identified to hack into additional devices or accounts.
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(Photo: iStock)
|Where in the world are HNW individuals?
After buying a house in the United States, HNW homeowners often turn their eyes across the pond when purchasing a second or third home. Be it in Europe or beyond, it's easy to understand why certain risks can go unnoticed when lounging on your deck in the French Riviera or recovering from a day on the slopes in your Swiss ski chalet.
Depending on location, there are laws and regulations that can affect the way property, homes and hired staff are managed and protected.
For example, for HNW families travelling with young children, many parents will bring along their nannies or au pairs. However, U.S. Workers' Compensation coverage might not fly overseas. If a nanny injures herself while on the job in France, there is no waiting period to receive payments (unlike in the United States). In the United Kingdom, employer liability insurance — that country's Workers' Compensation equivalent — must be put in place at the moment of hire, not the first day on the job.
Most importantly, policies issued in the United States may be negated overseas if they are not issued through a locally admitted agent or broker.
The only way to ensure HNW individuals are protected anywhere in the world is to speak with an agent or broker who is familiar with international insurance regulations and laws. The good news is that many agents and brokers who specialize in working with HNW individuals are knowledgeable about international insurance needs and, if not, they can point individuals in the right direction to ensure proper protection.
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(Photo: iStock)
|Owning a home in high-risk areas
For those HNW individuals who prefer to stay stateside, many often purchase additional property in areas known for good weather, fun activities and high-end living.
According to the National Association of Realtors, 46% of vacation homes purchased in 2014 were in the South, and 25% in the West, both hotbeds for wildfire activity. These numbers underscore the fact that, beyond wildfires, many of the most luxurious locations for secondary homes are in high-risk areas.
As a result, HNW individuals face increased exposure to hurricanes, wildfires, earthquakes and severe storms. Protecting property from these extreme elements requires HNW individuals to be one step ahead of Mother Nature. Depending on their location, there are a variety of protective measures they can take:
- In locations exposed to wildfire, homeowners should be sure to clear excess debris and underbrush near the house. Patios should be cleared of flammable furniture when not in use, and open vents and ducts should be properly covered.
- Although hurricanes don't allow for much prep time, there is still much that can be done in advance. HNW individuals with coastal property should test their backup battery system and generator. (Those that don't have a generator should consider having one installed.) Washing out exterior drains and gutters, reinforcing garage doors and installing storm shutters and hurricane straps can make the difference between minor and extensive damage.
- There are a host of measures homeowners should take to protect against earthquake-related damages, especially those with art or wine collections. Ensure art is properly secured with special mounts to the wall, and anchor free-standing items to the ground. Earthquake netting can also prevent wine bottles in cellars from falling from their racks and shattering.
Stay one step ahead
For many HNW individuals, their risk profile changes with each new purchase or investment they make.
To protect themselves, it is imperative that HNW individuals talk to an agent or broker that specializes in the HNW market — they may be surprised by what they hear.
Frances D. O'Brien is a senior vice president at Zurich-based Chubb Ltd., and division president of Chubb's North America Personal Risk Services.
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