Guide to High Net Worth homes and insurance
You might have seen the term “high net worth” and wondered quite what it means when used to describe your home or the insurance cover that needs to be in place to protect it.
Probably your first question is going to be whether your home fits the description of high net worth (HNW) – or one of the alternative descriptions sometimes used to denote homes of exceptional value, such as high value home, prestige home, ultra home, or ultimate home, to name just a few.
If your home fits any of these descriptions, there are a host of additional questions likely to be posed – and it is the aim of this big guide to help address them.
To do that, we’ll take a closer look at:
what is high net worth home insurance – what makes it special, who is it designed for and what might it cover;
types of high net worth cover – there is the structure and fabric of the building, of course, but also insurance for the contents, collectables (e.g. jewellery or fine art insurance), swimming pool and outbuildings, all of which make for a unique mix of elements;
property types – just as high net worth insurance might be described in a number of different ways, so too may it be used to safeguard a wide variety of property types;
the importance of high net worth insurance – however you choose to define any high net worth property, appropriate and adequate high net worth home insurance is very important and it’s why we’ve made it one of our specialities here at UKinsuranceNET;
places in the UK where you might find high value homes – prestige homes may be found in practically every part of the country, of course, but we help to identify those areas where prices currently reflect the number of higher value homes;
what to look for when purchasing a HNW or listed property – if you are on the lookout for a high value home of your own, we suggest some of the features and considerations you might want to keep in mind;
what to do when trying to sell a HNW or listed property – it is not only a question of “buyer beware”, of course, but there are equally important factors to take into account when seeking the best price for any high value home you might want to sell.
The term high net worth home insurance refers to the residential property which the cover is designed to protect – and this includes not only the structure and fabric of the building, but its contents, outside features such as swimming pools and outbuildings, property owner’s liability insurance, alternative accommodation in the event of a major insured event, and additional elements such as home emergency cover, accidental damage and damage by pets (some of these elements are not offered by standard home insurance policies).
When your home is described as high net worth, this is a relative term, of course. There is no absolute standard. However, the value of the home may be one of the most conspicuous measures of an individual’s wealth – and there are a number of definitions of such individuals.
Even here, though, that measure of wealth may be relative. One of the most common rules of thumb is that any “millionaire” is a high net worth individual. According to a story in the Guardian newspaper in 2015, there are some 840,000 millionaires in the UK and these own 38% (or £2.3 trillion) of the country’s wealth. The Boston Consulting Group has also reported that the number of billionaires in the UK is second only to the United States.
The financial regulator, the Financial Conduct Authority (FCA), also adopts a definition of the high net worth investor – an individual earning more than £100,000 a year and owning assets in excess of £250,000 (although this excludes the value of the individual’s home).
The wealth owned by high net worth individual sets him or her apart from those who own a more modest amount of wealth. The former’s wealth might be expressed in particular lifestyle choices – which to a greater or lesser degree – illustrate the status held by a high net worth individual. In addition to a prestige home (or homes), this might be reflected in the car or cars they drive and the high value of the contents of their home (such as works of art or other valuable collections, for example).
Because wealthy individuals and the homes and possessions they own are in this way out of the ordinary, high net worth insurance also takes on the need to reflect extraordinary value of the home that is owned. Standard home insurance, for instance, is unlikely to provide the level of cover or the tailored insurance solutions that are needed.
For that reason, specialist high net worth home insurance has been developed and is provided by specialist insurers such as ourselves here at UKinsuranceNET. This calls for a specialist approach to private client insurance that delivers a first-class, highly rated product. It is also why all of our specialist, HNW and prestige property insurance we arrange here at UKinsuranceNET has been awarded a five-star rating by the premier financial research and standard-setting defaqto organisation.
Probably more than any other home owner, owners of high value properties are especially particular in the insurance cover they arrange. They need to be, since the price of getting it wrong might prove extremely costly indeed.
Policies therefore need to be capable of being personally tailored and sufficiently flexible to meet any particular client’s needs – in other words, a form of bespoke insurance is typically required.
Nevertheless, that form of HNW insurance generally spans at least three main headings when it comes to protecting the property and its contents:
as with any type of property insurance, cover for a prestige or high value home also has at its heart the protection of the very structure and fabric of the building against a wide range of potentially very damaging risks;
these are likely to include the risks of fire, storm damage, flooding, impacts (from falling objects such as trees and their branches or impacts by vehicles), escape of water or oil from pipes, vandalism and theft – although this list is by no means exhaustive;
many high value homes are architecturally distinctive - such as listed buildings - and this may mean that no standard construction materials and techniques have been employed (at its simplest, standard construction is any building having walls of brick or stone and a roof of tiles or slates, all others may be considered “non standard”);
buildings of non standard construction make regular home insurance companies wary of extending cover – the risks and perils may be relatively unknown, depending on the particular construction techniques and materials used;
it means that you may encounter difficulties arranging cover at all, or, at best, having to pay considerably more in premiums;
it is not only non standard construction which deters many regular home insurers, but also other “unusual” or distinctive properties, such as those incorporating a thatched roof or listed and graded buildings (which by their very definition, are of special architectural interest);
our prestige property insurance packages also provide between a maximum of two to five years (depending on your choice of policy) of alternative accommodation in the event of a major insured incident which leaves your home temporarily uninhabitable;
to get the building insurance you need for your prestige or high value property, therefore, you might want the reassurance of a specialist provider with expertise and experience in arranging cover for your home (no matter how unusual or distinctive it is), at a competitive rate;
high value homes invariably contain high value contents – both in the general standard and quality of furniture and furnishings, but also in the likelihood of there being precious works of art or other collections of valuables and expensive jewellery;
once again, the high net worth individual may encounter difficulties in arranging adequate insurance cover for contents such as these, since, not only is there a maximum amount payable by the insurer on any one claim, but there is also likely to be a maximum that may be claimed for the theft, loss or damage of any single item;
regular home insurance policies are likely to have a limit of only £1,000 or £2,000 on any single item – and this is likely to be quite insufficient for the cover of valuable collectibles, works of art or even single pieces of precious jewellery;
by choosing one of our defaqto five-star rated policies, however, you may choose from a £75,000 contents package which includes up to £15,000 cover for any single claim relating to fine art, antiques or collectables (and up to £5,000 for any single item of jewellery or watches), a £150,000 contents package which includes up to £25,000 cover for any single claim for fine art, antiques or collectables (and up to £10,000 for any single item of jewellery or watches), or a top of the range £250,000 contents package which has no limit on any single item claimed under your general contents insurance and up to £25,000 for any single item of fine art, antiques, collectables, jewellery or watches;
we can also offer bespoke options if you require:
fine art insurance;
other HNW collectables insurance.
Property owner’s liability insurance
as the owner of any property, you have a duty of care towards visitors, neighbour and members of the public who may be injured or have their own property damaged through contact with your building;
if an injury or property damage is sustained, you may be sued for a substantial amount in damages – claims which may involve even greater sums, simply because of the high value of your particular home;
whereas it is common for regular home insurance policies to provide up to £1 million in property owner’s liability insurance, in the case of our range of high net worth property insurance policies, on the other hand between £5 million and £10 million cover is provided – depending on the policy you choose;
your prestige home may well have a swimming pool, outside changing and shower rooms, other outbuildings and landscaped gardens;
these, too, are vulnerable to the risks of loss or damage, yet many ordinary home insurance policies may offer scant cover for the considerable value represented by these features of your home;
a specialist, high value home insurance policy may help to ensure that these features of your home receive the protection they deserve.
High value, prestige home come in all shapes and sizes, built to a huge range of architectural designs, or of special historic interest.
Your own high-end home may be unique, but there are some home which may tend to group into specific building types – lending them a distinctive, out of the ordinary appearance and character and which command an especially high value as a result.
Thatched roof buildings and insurance
Pretty as a picture postcard they may be, but thatched cottages – or any property which incorporates a thatched roof over some part of the structure – invariably command a higher value than their more conventional neighbours.
Unfortunately, however, the very characteristics which lend these properties such an appeal – and value – are the very characteristics which make many mainstream home insurers shy away from extending building and contents cover, or doing so only at an inflated price of insurance premiums.
Insurance for thatched homes, is as important as the protection of any other homes, of course, but may be fraught with difficulties. A specialist provider of cover for higher value homes is more likely to be able to tailor the particular cover you need – at a competitive rate.
You might want to keep in mind some of the conditions relating to checks and inspections which need to be carried out on buildings with thatched roofs – as suggested by the Thatch Advice Centre.
Listed buildings and insurance
Your high value home might be formally recognised – by Historic England – as one of particular historic or architectural interest. If that is the case, it may be inscribed as a “listed building”.
The purpose of listing the building in this way is to ensure that it becomes subject to strict planning constraints, designed with the intention of preserving it for the enjoyment of subsequent generations.
Although many listed buildings are very old, this is not always the case, although age is certainly a factor influencing the decision to protect it through the listing process. If the building is more than 350 years old, and still recognisable as the structure for which it was originally intended, for instance, it is almost certain to be listed. Most of those built between 350 and 200 years ago are also listed. Normally a building needs to be more than 30 years old before it is considered for listing.
Grade I means that the property is of exceptional interest – and of such scarcity that only 2.5% of all listed buildings are Grade I;
Grade II* is also a building of especially important interest and these account for 5.5% on the official register; and
Grade II buildings are also of special historic or architectural interest and account for the remaining 92% of all listed buildings – as such, these are the “graded” or listed buildings most likely to be owned by the high net worth individual.
By their very definition, listed buildings are out of the ordinary – there are only 500,000 or so out of a total 25 million or so dwellings in the UK.
There is a strong chance that any listed building is also non standard construction – the building techniques or materials used are not the standard brick or stone for the walls and tile or slate for the roof.
The special and distinctive nature of a listed building, especially if it is also of non standard construction, also makes listed property insurance, or Grade II listed building insurance, also a special case – typically requiring the input of a specialist broker with expertise and experience is arranging such listed building home insurance.
Non standard construction
It is not only listed or graded buildings and homes which may be non standard construction.
Any dwelling which has been constructed using out of the ordinary building techniques or materials may require the special consideration of non standard home insurance.
The architectural interest and rarity of a high value or prestige home might derive from the very fact of its non standard construction. In the use of expensive imported materials – such as marble, for example – or the innovative building techniques employed in order to achieve the finished eye-catching effect, your high value home might boast the fact that non standard construction is featured.
Yet that very term “non standard”, is also one that typically sets alarm bells ringing for many ordinary home insurers. If construction, design or materials are non standard, they might argue, it is considerably more difficult to assess the risks and the sums that might need to be paid out in the event of a claim. Cover may be declined or offered at a heavy premium.
To ensure that your home remains suitably protected by non standard building insurance, therefore, you might want to find out more about this type of cover.
Whether your high value home is of special architectural interest, incorporates a thatched roof or two, or is a formally listed building, high net worth or HNW insurance remains critical to ensuring that it is adequately protected against all manner of risks and perils likely to incur extensive and expensive loss or damage.
Indeed, the more highly valuable the building and its contents, it might be argued, the more important becomes the need for the relevant form of insurance.
Not only that, but HNW home insurance also needs to be sufficiently flexible and carefully tailored to suit the individual and distinctive feature, characteristics, and risks or a variety of different property types, where considerable value is reflected in the building itself, its contents or its grounds and outbuildings.
Given the substantial investment at risk, that insurance cover also needs to be of the highest quality and reliability.
Probably the most reliable and authoritative measure of those standards exists in the rating system devised by financial researchers and assessors, defaqto. This awards “stars” to a wide range of some 41,000 different financial products – including insurance for high net worth, high value homes.
The highest accolade awarded by defaqto is a five-star rating – and this is the standard achieved by the HNW insurance policies arranged by us here at UKinsuranceNET. It is a rating which recognises the quality and comprehensiveness of the features and benefits of the particular insurance products concerned.
Five-star ratings recognise that these products go above and beyond the levels achieved by many other, regular home insurance policies.
This is expressed in the range of different property types which may be insured – from thatched cottages to listed buildings and other homes of non standard construction – and the level of cover offered.
Where many regular building insurance policies may be restricted in the range of risks and perils covered, for example, HNW home insurance provides comprehensive protection on an all-risks basis and extends to outbuildings, swimming pools and the grounds themselves.
Five-star rating also reflects the much higher than usual single item claims limits on high value items such as fine art, collectibles, jewellery and watches – against risks that are covered worldwide (rather than being limited to the UK or Europe, as many lesser policies may do).
When it comes to safeguarding the property owner’s liability for claims made by individuals who may have been injured or had their own property damaged, the five-star rating of HNW home insurance guarantees that the level of protection is as much as either £5 million or £10 million, depending on the particular policy you choose, rather than the modest £1 million of indemnity offered by many other home insurance policies.
Although high value might be something of a relative term, there are some markers that it is possible to use in order to identify those areas of the UK where you are likely to find those of higher than average values.
There are likely to be few surprises in the fact that the highest value homes are generally in London and the South East of England and that there continues to be a noticeable north/south divide in property prices.
This is against a background of steadily rising house prices. According to research conducted by Santander banking group, and published in the Guardian newspaper in February 2016, there are currently some 500,000 homes in the UK valued at more than £1 million (one of the possible definitions of the high net worth or high value home). By the year 2030, however, this figure is estimated to increase more than three times over to a total of 1.6 million homes.
London alone, says the report, is estimated to have nearly one million homes (one in four) valued in excess of £1 million by 2030 – making the capital the most obvious contender for the highest value homes in the UK.
In two London boroughs – Kensington and Chelsea and the City of Westminster – up to 70% of all homes are estimated to be valued at more than £1 million by the year 2030 and more than half the homes in the boroughs of Camden, the City of London and Hammersmith and Fulham are likely to be similarly priced.
The estimates are supported by figures published by online estate listing agency Zoopla at the beginning of 2017.
The most expensive street in the capital, for instance, is Kensington Palace Gardens, where the average home costs £40,633,525. Zoopla’s figures also show that the average price of homes in the boroughs of Kensington, Knightsbridge and Chelsea has already topped £2 million.
Nine out of ten of the most expensive streets in Britain are in London, said a report in the Daily Mail newspaper on the 23rd of December 2016, quoting figures compiled by Lloyds Bank.
South East England
In the South East of England, the most expensive streets are to be found in Weybridge, in Surrey, where the average house price on Camp End Road is in excess of £5 million.
South West England
In the South West, the highest average house prices are likely to be found in Poole, Dorset – home to the high value enclave of Sandbanks – where average prices in some areas are currently more than £4.6 million.
North West England
The fourth most expensive place in which to buy property is the North West of England, where the average house price in parts of Altringham has reached more than £2 million.
In the East of England, the city of Cambridge tops the list of high value homes, where prices in one street in the city currently stand only a shade less than £2 million.
York and Humber
In the North East of England, the city of Leeds has areas where the average price of homes is also over one million pounds – £1.3 million.
Leicester, in the East Midlands, also boasts areas where average house prices have topped £1 million. Warren Hill, on the outskirts of the city, for example, currently sees homes reaching an average value of more than £1.2 million.
In Wales, during 2016, homes in both Penarth and Swansea achieved more than £1 million on the sales market.
Christies Estate Agents currently list some 18 homes in a wide variety of locations in Scotland where prices are expected to achieve more than £1 million.
Has your appetite been whetted for the purchase of a high net worth or listed property?
Before pursuing that interest, there are a number of factors you might want to take into consideration:
What makes it a high value property?
The market price of any property, of course, is the sum that a buyer is prepared to pay – and by no means the price that might be currently advertised by the hopeful vendor.
When choosing your high value home, therefore, it is vitally important to arrange a thorough and detailed valuation of the property, by instructing suitably qualified professionals.
The Royal Institute of Chartered Surveyors (RICS) publishes two useful guides explaining the principles involved in the valuation of property.
When comparing the expertly prepared valuation against the advertised price of the property, you might also want to ask yourself what attracts you to this particular home. Is it because of its location, perhaps, or because of its architectural interest or prestige? Understanding the reasons for your interest may help you to negotiate the appropriate price.
Included in this balance is also the estimated cost of ongoing maintenance and repairs to the property and whether you are planning any major refurbishment or extension to the existing buildings.
You might want to conduct especially rigorous surveys and valuations of any building that is already listed.
Its historical or architectural interest has already been recognised in the process of it being listed, but that also comes with – potentially onerous – responsibilities and obligations.
Listed buildings are invariably old. Old buildings are likely to require more frequent, and more expensive, maintenance than those which have been recently built.
Any repairs that are carried out – and certainly any building alterations you intend to make – need to comply with the strict planning and building restrictions that apply to listed buildings, both inside and out. These reflect the recognition given to the special architectural or historic importance granted when the building was formally listed.
The Listed Property Owners’ Club (LPOC) stresses the importance of ensuring that before embarking on any demolition of the existing structure, or alteration or extension of the building, you must obtain Listed Building Consent (LBC) from the conservation department of your local council’s planning authority. Your application takes into account the extent to which the character or setting of the listed property may be affected by your proposed building works.
This is considered such a serious matter that you may be fined – or even face imprisonment – if you fail to obtain the necessary consent. If you have gone ahead with any alteration without applying for consent, the local authority may serve an enforcement notice on the unauthorised works and require you to restore the building to its original state.
It is also important to bear in mind that these conditions and enforcement notices may apply to alterations that have been made by previous owners of the listed home – so it is important to verify that any necessary planning consent has been granted.
Considerations such as these – and the potential consequences of a listed building enforcement notice – need to be taken into account when arranging your specialist listed building insurance.
The sale of a high net worth or listed home is likely to call into question a number of considerations that set it apart from a decision to sell a standard property.
In guidelines published by the Home Owners’ Association (HOA), it is suggested that a first step before deciding to sell any home is why you have decided to sell or whether there are other alternatives to consider.
In the case of a high value home, for example, the simple cost of selling needs to be taken into account. This is likely to involve the potentially costly fees of professionals such as estate agents and solicitors, but, in the case, of HNW properties the additional cost of Stamp Duty.
Stamp Duty needs to be paid by the vendor of any property that is sold for more than £125,000. The rate paid increases in line with the value of the property, so that you may be paying rates of up to 10% on property selling for between £925,001 to £1.5 million or as much as 12% if it is sold for more than £1.5 million.
If you have a mortgage on your home, you need to inform the lender of your decision to sell – with the aim of repaying the mortgage or remortgaging.
In either event, there may be a penalty to pay for early repayment of your current mortgage.
Your next home
If you are selling your current home, of course, you need to decide where and when you are moving on.
The purchase of a new home may be involved and time consuming, requiring a very careful timetable of events involving your sale of the current home and purchase of a new one.
You might want to consider the option of renting your alternative accommodation after the sale of your present home, so that you have a breathing space and safety net that reduces any temptation to sell your home at less than its market value simply to ensure a timely completion.
Although there is nothing to stop you from attempting to advertise and organise the sale yourself, as the owner of a high value home, you probably want to enlist the expert, professional advice of a reputable estate agent, experienced in dealing with high value properties, to make sure that you are selling at the best possible price.
This is an area where there may be a glimmer of good news for the owners of high value property, since estate agents are likely to offer a more favourable rate of commission the higher the price of the home being sold.
This is because most agents charge a percentage of the sale price of the property – and in the case of a prestige home, this is clearly likely to represent a considerable sum.
Whereas estate agents typically tend to charge between 0.75% and 3% of the sale price by way of commission, for a higher value property, you might be able to negotiate fees of less than 1%, suggests the HOA.
Estate agents can also check that any potential buyer has the necessary funds available to buy your HNW home, saving you time and effort with time-wasters.
If yours is a listed building, of course, any vendor is going to seek assurances about the specific grading (Grade II, Grade II* or Grade I) and that all repairs, maintenance and alterations have complied with the planning restrictions applied to such buildings.
Any home owner is likely to give a high priority to safeguarding the property with adequate insurance – it probably represents one of the largest investments he or she is likely to make.
The same is true for the owner of a high value home, except that the special features and characteristics that make it especially high value are also those features which call for specialist high net worth home insurance.
The special nature of that cover may be reflected in the total building sum insured, of course, but any high value property is likely to be covered by an all risks policy, rather than one in which certain risks and perils are excluded.
Just as the building itself is higher than usual value, so too are the contents more than likely to include antique or high-end furniture and furnishings, valuable collections of fine art or other collectibles – maybe even a well-stocked wine cellar. In addition, the owner and his or her family may also possess precious jewellery and high value watches.
The contents insurance typically included in high net worth home insurance, therefore, typically increases the limits that may be made in any claim for the theft, loss or damage of a single item – from the £1,000 or £2,000 frequently imposed by ordinary home insurance policies, to limits in the tens of thousands of pounds.
Similar increases in cover are likely to be reflected in the property owner’s liability indemnity included in high value home insurance – as much as £5 million or even £10 million of cover, instead of the £1 million limit typically provided by more standard forms of home insurance.
The type of high net worth home is defined not simply by its market value, but also by special considerations such as its architectural interest and prestige, whether it is a listed building or even whether it has a thatched roof.
Whatever type of property it may be, however, if one thing is certain, that is the importance of HNW insurance for the building and its contents.
There are currently an estimated 500,000 homes in the UK which are valued in excess of £1 million, but that number is estimated to triple – to 1.6 million – by the year 2030. Although London is where you are likely to find the most expensive homes, other regions also have their fair share.
Finally, there are special considerations you might want to take into account when buying or selling an HNW or listed property.