Insurers home in on quality street

For Many homeowners, particularly those in London and the South- east, one bittersweet consequence of the recovery has been the discovery that their properties and contents cost much more to insure.

Falling premiums may have cushioned the blow of greater insurable values up to now. But with the cost of cover beginning to rise again, it makes sense to review policies and perhaps opt for a cheaper alternative.

Perhaps surprisingly, for a growing number of people "high net worth" (HNW) policies are proving a sensible alternative to standard household insurance cover, offering savings of up to 30 to 40 per cent on premiums. This is especially true for those able to demonstrate a "responsible" occupation and lifestyle.

Most HNW policies only cater for buildings worth more than pounds 200,000 and contents worth more than pounds 75,000. If house price predictions come true in the next couple of years, many with a house worth pounds 150,000 in mid-1995 will soon qualify. Some quirky properties, or ones set in newly desirable areas, may already do so.

As for the value of contents, the limits might appear high but many people exceed them without realising it.

Steve Windich, the managing director of Wellington Personal Insurances, explains: "If anyone really sat down and priced up the value of their possessions, they would almost certainly have a pleasant shock. We find most people under-insure on contents. Normally, if their contents are worth pounds 75,000, they will have insured for pounds 30,000 or pounds 40,000."

Specialist HNW insurers tailor packages to suit specific needs based on a thorough understanding of an individual's circumstances. Their competitiveness against standard policies stems from a number of factors that can make wealthier households better risks.

Insurers have discovered that better-off owners are likely to pay more attention to security, take greater care over their possessions and be less inclined to make fraudulent claims.

Moreover, art and antiques tend to be less popular with bur-glars than televisions and videos because they are harder to dispose of on the black market.

The in-house expertise and policy wordings of the leading HNW players make them attractive to those with many antiques or works of art. A standard household policy will, for example, only pay for the cost of restoration and repairs to an item of value. By contrast, good HNW cover will also refund any subsequent loss of value.

Such policies can also be convenient in other ways. Standard household insurers sell most of their buildings and contents insurance as separate contracts. HNW policies, however, package both together.

This can be a big advantage when claiming, as it avoids disputes between insurers over whether items such as kitchen units, bedroom cupboards and floor coverings constitute buildings or contents.

HNW policies also offer the opportunity to include numerous add-ons such as boats and second homes.

The popularity of the HNW market has led to the growth of a subsidiary type of cover, aimed at "mid net worth" (MNW) clients . Started in October 1994 when Norwich Union launched its Highline insurance package, these policies generally offer cover on buildings worth pounds 100,00 and contents worth pounds 50,000. Some go far lower. Guardian's Select, for example, caters for buildings worth pounds 50,000 and contents of pounds 35,000.

MNW insurance has turned into a boom area, with many of the leading HNW specialists offering the cover alongside their original products.

This is because insurers have discovered that many MNW policyholders are in reality aspirant "high net worthers". "We are largely talking about people from the same backgrounds." says Mr Windich. "Attitudes towards security and claims differ little, in fact, [from] the next value bracket down."

"There really isn't a great deal of difference between the two [insurance] markets," adds Tom Walton, UK marketing director at Towry Law, a specialist broker in the field. "They both offer a packages approach and tend to be more cost-effective than standard household policies - for better risks.

"Nevertheless, HNW policies have to be tailored more to the individual and involve more attention to detail. MNW policies are more sweeping and all-embracing. They provide you with everything you need and all you have to do is sign a form."

Wellington's Bronze policy takes this approach further than most, negating the need even to work out the value of contents. These are automatically insured for 35 per cent of the building's value.

Limits on MNW policies are lower than those on the more luxurious ones. Cox's Cotswold policy, for example, has a single- article limit of pounds 5,000 on fine art and antiques, pounds 2m on property owners' liability and pounds 2,000 for personal possessions. Its upper-end Portfolio policy, on the other hand, has limits of pounds 15,000, pounds 5m and pounds 5,000 respectively.

Otherwise, Cox's two policies are virtually identical, with the insured having access to the same expertise for fine art and antiques and to most of the same additional benefits. Cox even uses identical rating structures for both products.

The only big remaining difference is that Portfolio provides full annual travel insurance for all the family. Cotswold limits its travel cover to medical and emergency expenses.

However, not all MNW policies claim to offer quite the level of savings that can be achieved with HNW cover. At best, they may be about 20 per cent cheaper than standard household policies.

Even where savings on premiums are minimal or non-existent, the one- stop-shop approach has obvious attractions. Guardian's Select policy, for example, does not always sell itself on rates alone but offers the opportunity to take out cover for caravans, dinghies, horses and ponies, travel, personal accident and even against being summoned for jury service (expenses up to pounds 25 a day).

Whatever their merits, even the better high and mid-net worth products can differ significantly in their small print. To obtain value, and beat standard deals, it is essential to consult a broker with specialist knowledge. Insurers may in any event insist on using an expert, and they will normally recommend one in the customer's area.

Policies for hot properties

Company Policy Target market

Chubb Insurance Masterpiece High net worth

0800 111511

Hiscox Underwriting House & Contents High net worth

0171 423 4200

Wellington Personal Gold High net worth

01993 771717 Bronze Mid net worth

Cox Underwriting Portfolio High net worth

01608 643344 Cotswold Mid net worth

Norwich Union Highline Mid net worth

01603 686860

Independent Insurance Home by Design High net worth

01732 865211 Home Guard Mid net worth

Guardian Insurance Heritage High net worth 01473 212422 Select Mid net worth