In the rolling hills of eastern Pennsylvania sits a two-story home on 10 acres of land. This is shelter, but not for just anyone. It is shelter that belongs to members of a class the insurance industry likes to call the "mass affluent."
In this particular home, located on a winding lane called Hampton Court, it is the interior details that make Chubb appraisers take note, for it is these details that will secure it a price in the realm of seven digits. It is these details that will force Chubb to pay up big, should the home suffer damage and its owners one day file a claim.
No, this home is no ordinary State Farm "drive-by," where appraisers take a quick snapshot of the home to prove that they are insuring a property that in fact exists.
This home, located in a community where home values range from $500,000 to $1.5 million, requires cracking open the front door and stepping inside.
In the living room, custom features grace the mantle, the fireplace and chandeliers, says Katherine E. Remus, Pennsylvania appraisal manager for Chubb. Walls are bracketed by picture frame moldings on the bottom and crown molding at the top. Windows are highlighted in leaded glass. The floors are made of hardwood.
"These are all the things that make this type of home a little bit more custom," says Remus.
"Another thing, too, that we look at when we come into a home is we take a look at the crown molding and see if we can tell if it's true custom-milled hardwood versus more of a fiberboard," she says.
Some molding, like the design adorning the ceiling above the chandelier hanging in the dining room, is made of foam. Foam is typically prepressed or precut.
When these kinds of details are made of wood, they're typically carved on-site by carpenters, and that means they're more expensive to replace, should that time ever come.
Then there's the wainscoting. Like paint and the multiple shades it comes in, wainscoting comes in a variety of styles: horizontal wood, picture frame, bead-board, recessed panel, raised panel, tongue-and-groove, vertical wood, pressed leader and hand-carved motif.
This particular Hampton Court house was built in 1990. Every interior aesthetic element is copied from styles invented in an earlier time. This is a hallmark of affluence for the masses: There's nothing really original, or priceless. There is plenty of good craftsmanship, however, which is merely expensive.
A style that was invented and produced in the 19th century can never be replaced. But a style invented in the 19th century and copied by craftsman in the 20th century can be replaced relatively easily in the 21st century.
This is why Chubb sends appraisers into homes: to calculate replacement costs of the property. Because nearly every room in this particular home has custom details, Remus estimates that replacing this home would cost between $200 and $250 per square foot.
In the dining room, for example, the walls are padded with fabric. Faux finish and tromp l'oeil elements have been rubbed into the molding. All this, says Remus, drives up the cost of a home.
With the exception of a possible whimper of protest from an aesthete, the incongruous styles from one room to the next bother neither the owners nor Chubb.
"Since we're looking at the replacement cost in the home, we don't look at the style," says Remus. "We look at what they've done room to room."
Every room, it seems, is constructed as if accountable to its own profit and loss statement.
Other details that will drive up the replacement value of this home include the slate and brick fireplace, the recessed lighting and, integrated into the ceiling of the living room, the speakers of the stereo system, an intercom system running through the entire house, radiant heat rising from floor tiles. One other point of note is the 24-carat gold bathroom fixtures.
"You can tell the difference between brass and gold," says Remus. "It just has a slightly more yellow or richer-looking color to it than brass."
In addition to the bathroom fixtures, the owners of this particular home have seen fit to install a washbasin painted with a hummingbird and floral motif--all hand painted of course--matching the walls and ceilings. Upstairs, the master bathroom, adjacent to the master bedroom illuminated by tray lighting, is equipped with a steam shower.
All these details are recorded by Chubb's appraisers, and will be taken into account by the carrier when calculating premiums.
Among the more unusual details that automatically raise the replacement cost of a home are antique box locks, wide-plank hardwood floor, central vacuum systems, stained plaster walls, coffered ceilings, intricate trim work and custom chandeliers. Home owners even sometimes build swimming pools or bowling alleys in their basements.
"Some of the houses, without going into them, are very different, and expectations about them can change radically as soon as you walk in the door," Remus also says.
Ironically, perhaps the most original artifacts owned by this family on Hampton Court are tucked away in the basement. There on the wall, under the pressed-tin ceiling tiles, are memorabilia that one day will be worth a pretty penny.
They include a poster of the movie "Casino," signed by Robert DeNiro, Sharon Stone and Joe Pesci; a poster of the movie "Wolf," signed by Jack Nicholson and Michelle Pfeiffer; and an electric guitar signed by Roger Waters and other members of the superstar rock band Pink Floyd.
"I've been in houses before with extensive collections signed by sports stars," says Remus. "Those actually have significant value when they reach a certain point."
At the very least, these home owners appear to be guilty of underexposing what's really unique in their home, and of overexposing that which is not unique enough.
Remus says that fine art and furniture are not evaluated as part of the replacement cost of a home. A certain percentage of the replacement value of the home is allocated to the items. Home owners are free to cover those items through separate policies. So, the higher the replacement cost of the home, the higher the premiums paid to carriers.
Plenty of home owners in the United States own a lot more than 10 acres on a winding road called Hampton Court on the outskirts of Newtown, Pa.
Those folks belong to the ultra-affluent, a world coveted by any carrier in the high-net-worth market, but courted most aggressively in the last few years by American International Group Inc.'s Private Client Group.
Clients of Private Client Group might include Martha Stewart, the "doyenne of domesticity," who owns a $40 million compound on a 153-acre spread in Connecticut.
Or it could include designer Vera Wang. She and her husband own an antique-filled 17-room apartment in New York, along with homes in Southampton, N.Y.; Palm Beach, Fla.; and Paris. She is also reportedly looking at buying another home in Shanghai.
For carriers chasing the high-net-worth market, finding an ultra-affluent client amounts to booking a room at the Shangri-la.
Just what kind of replacement values carriers have placed on properties owned by Wang and high-net-worth customers of her ilk is a flight readers are welcome to take using their imaginations.
CYRIL TUOHY is managing editor of Risk & Insurance®.
April 15, 2006
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