Home insurance goes top shelf

You don't normally associate classy names such as Masterpiece, Restorationist and Prestige Plus with something as mundane as homeowner insurance policies, but more insurers are using the cachet to cash in.

For a steeper price than a standard policy, carriers are offering premium coverage -- and status symbol appeal -- to owners of high-value or historic homes.

"The whole push is on 'Spend a little bit more, get a lot more in return,' " says Bruce W. Anderson, senior vice president of marketing and sales at Middlesex Mutual Assurance Co. in Middletown, Conn.

The special homeowner programs, marked by broader coverage, higher limits and more flexibility than traditional policies, are giving insurers a way to differentiate themselves in a crowded market and grab favored clients, industry officials say. Homeowner insurers, whose financial results in auto insurance are flagging, are looking for business that will boost returns.

For affluent consumers, the strategy brings more insurance choices -- and the responsibility for more homework and decisions when it comes to protecting their houses.

New Jersey-based Chubb Corp., with its Masterpiece program, and California's Fireman's Fund Insurance Co., with Prestige Plus, are among the best known and earliest entrants in the affluent market. New York-based Atlantic Mutual Cos. is also a longtime player in the field.

In January and February, Middlesex Mutual introduced the Restorationist in Connecticut, designed for "antique homes." Those are houses built before 1930 that generally would cost $250,000 or more to rebuild and have prized features worth restoring, such as wide-plank oak floors, crown moldings, and plaster instead of Sheetrock.

This spring, The Hartford Financial Services Group sprang into the market with Distinct Advantage, aimed at homes that would cost $300,000 to $700,000 to replace.

Not all insurers target the same strata of the affluent.

Earlier this month, American International Group in New York announced the launch of its Private Client Group, a division focusing on people who spend more than $10,000 a year for personal insurance and have a net worth of at least $5 million, says group President Ross Buchmueller, a former Chubb executive.

AIG was already insuring private jets and kidnap-and-ransom risks, and more recently it developed a special upscale homeowner policy. The Private Client Group, targeting the top one-half of 1 percent of the population, brings together company activities to customize coverage and claim-avoidance advice for rich people.

Many insurers can provide broader than normal coverage with riders called "endorsements" for an extra premium, and can accommodate high-value homes. But relatively few have made the affluent their primary target or launched special marketing efforts aimed at them with tailored insurance packages.

Insurers' special programs have several important differences from standard homeowner policies:

Some, including Chubb, Fireman's Fund and Middlesex Mutual, say they will pay whatever it costs to replace your house, even if that's more than the amount for which it's insured. This is often called "extended replacement cost" coverage.

With a standard policy's replacement cost coverage, if you've insured the house for $400,000 but it costs $500,000 to reconstruct to today's building codes, insurance may still only cover $400,000. You'd have to shoulder the $100,000 difference.

Upscale policies also may offer "open perils" coverage on the contents of your home, which means they're covered if damaged by any cause other than those specifically excluded, such as nuclear war, earth movement and fungus.

A standard policy would cover belongings if they're hit by any of 16 "named perils," such as fire, windstorm, smoke and theft. If the cause of the claim is not on the list, you're out of luck.

A regular policy may insure a home's contents for half the amount of insurance you have on the house itself. Upscale coverage may insure contents at 70 percent or more of the home's value.

Upscale policies frequently offer a "cash-out" option, meaning they will pay you the replacement value of your destroyed house without requiring you to rebuild, so you could use the money to buy another home somewhere else.

That especially appeals to people who like the real thing when it comes to antique homes, not just replicas, says Middlesex's Anderson.

Policies for high-value and historic homes typically pay more than traditional insurance for valuables, watercraft, refrigerated foods, sewer backups and other items. Limits on jewelry coverage might be $5,000 or $10,000 instead of the standard $1,000, for example.

Larger amounts of umbrella liability coverage -- $10 million instead of $5 million -- are usually available with the upscale homeowner policies to protect assets from lawsuits.

And what's the price of all these extras? Fireman's Fund estimates that its Prestige Plus could run 20 percent to 30 percent higher than the cost of a basic "HO3" policy.

Middlesex Mutual's Restorationist can cost 10 percent to 25 percent more than its standard policy.

In addition, some insurers want customers buying the special policies to accept higher deductibles, which saves the companies from many small claims and saves consumers some premiums.

David C. Andersen, a retired minister, says his Restorationist policy may cost roughly $250 more than the insurer's standard coverage. But, he notes, "The amount of additional coverage we have, compared to the additional cost, made it almost so reasonable as to be no question.

"They understand the old house, and that you don't go to Home Depot and buy a replacement door" for a historic home, says Andersen, whose hip-roofed colonial with a center chimney was built in the Connecticut River Valley in 1805 for a sea captain. "If anything happens, you're going to be covered for what you actually have, rather than getting the short end."

Insurers are upbeat about the outlook for their upscale business.

"It's a very fast-growing market," says Catherine M. Lamoreaux, senior vice president of marketing and chief operating officer for agency personal lines at The Hartford.

She cites nationwide data that show the number of new homes that sold in 1998 for $300,000 or more was double the number of 1994, and estimates that the market generates $6 billion in annual premiums.

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Consumers' growing savvy is "pushing more and more carriers to step up to the plate" with insurance products for high-value homes, says Michelle Kenney, director of personal insurance underwriting for Fireman's Fund. "The customer is becoming more educated, smarter, and more demanding of what they want from their insurance carrier."

Some consumers who've been through catastrophic claims are realizing how vulnerable they are to unexpected costs with a standard policy, Kenney adds.

The key for insurers to succeed in the upscale market, industry executives say, is white-glove claims handling.

If you've paid extra for a policy, "you don't want to be nickled and dimed to death for every receipt you've got," Kenney says.