Risk Management Tips for HNW Home Renovators

Once the project is underway, the key consideration becomes assuring that the worksite is safe for the family, crew and home. 

Safety starts with the character of the workers who will be coming onto the property. Wealthy families often have valuable possessions that make tempting targets for theft, and any family that will be living in the home or visiting the site frequently during construction needs to consider potential molestation or kidnapping. For this reason, homeowners should consider having professional background screens conducted on all the workers coming on to the property.

Given the importance of this step, insurance companies that specialize in serving HNW families often offer access to professional background screeners on a complimentary or reduced-price basis. In one especially large home renovation for a client of ACE Private Risk Services, background screening of the proposed staff and crew found that 30% had issues, including some with arrests for violent crime, cocaine distribution and use of false identification.

There are also a multitude of safety procedures to prevent worksite injuries and home damage due to fire, water intrusion and other perils. We've included an extensive checklist in our white paper on the topic of home renovations.

Fire in particular is a serious threat, especially when paints and solvent-soaked rags are prevalent in the final stages. We've seen too many homes burn to the ground just as the project neared the finish line.

The homeowner should also coordinate closely with the contractor on the use of alarms and other safety systems. Temporary systems may be necessary, and each party needs to know when they are responsible for turning systems off and on. For added assurance, insurance companies catering to HNW families may be able to send a risk consultant to the site to assess safety measures.

After Construction: Review Your Coverage

After a major renovation is completed, homeowners should always notify their insurance agent. If a builders risk policy was added, it can now be removed. The coverage amount for the home should be increased. In some cases the coverage amount may have already been increased in stages during the course of the project, and now is the time for the final adjustment.

While mass-market insurance companies may offer relatively little guidance on how much to increase coverage, high-net-worth market carriers may send an expert to the newly improved home to estimate what it would now take to rebuild it. 

The agent will also usually recommend increasing the coverage for the contents of the home, since most renovations include enlarging the home, upgrading appliances and adding new furnishings to fill the larger space. 

By reminding HNW clients of these simple steps, wealth advisors can help ensure that their clients' home construction projects are a success, every step of the way.