When Home Is a Castle

As affluent North Americans invest more in their houses, climate change, liability concerns are top-of-mind

December 27, 2023 Photo

For affluent Americans and Canadians, the pandemic created a shift away from simply owning possessions toward investments in entertainment, travel, and education—areas where they intend to increase their spending over the next year, according to Chubb’s inaugural report, titled, “The Wealth Report: Closing the Protection Gap in a Time of Increasing Risk.”

The report explains, “Home is seen first and foremost as an investment for 62% of respondents, but it also represents comfort, security, and family for nearly as many. The average value of respondents’ primary homes is $6 million, and 46% already own more than one home—a number that is likely to rise.” Forty-three percent are planning home upgrades or renovations, and 38% seek to increase the number of homes they own.

Increasing Luxury Means Increasing Risk

“As [the wealthy] invest more in creating a sanctuary at home, collecting fine art and luxury goods, and enjoying some of the experiences they missed during the pandemic, they face a complex set of risks to their wealth and lifestyle—and a growing gap in how they protect against those risks,” the report states.

Regarding the risks wealthy North Americans are concerned about, climate change and weather-related property damage top the list at 76%, as many respondents live in some of the most beautiful and severe weather-prone areas—particularly in warmer climates. However, “Weather damage is on the rise everywhere: more intense, higher-frequency storms in the Midwest, wildfires in the Canadian Northeast, and the growing risk of more deep freezes and ice storms in the southern states like those that have led to burst pipes in recent years,” the report states.

Other risks of concern to the wealthy include damage during renovations (71%); cyberattack/identity theft (67%); fire (64%); weather-related water damage (63%); weather related non-water damage (56%); non-weather-related water damage (54%) neighborhood crime (43%); and wildfire (31%). To mitigate these homeowner risks, 49% of respondents installed water-leak detection sensors; 48% installed whole-house generator; 48% installed smoke and heat detectors; 36% installed a state-of-the-art home security system; 22% implemented wildfire mitigation; and only 2% took no action.

The report notes, “There is a growing gap between the risks that wealthy North Americans see ahead and their understanding of how best to protect against them. To manage their wealth and protect it from risks, the majority rely predominantly on themselves (71%) and a financial advisor (73%).”

Liability Exposure for the Wealthy

“Wealthy North Americans have particular reasons to worry about personal liability,” states the report. “They recognize that the more they have, the more they stand to lose. Nine out of ten respondents are concerned about the size of a verdict against them if they were to be a defendant in a liability case, yet only about one in three (36%) say they have excess liability coverage. For those who do, the majority of policies are in the $3 million-to-$5 million range.”

When it comes to liability, the top concerns for wealthy respondents include auto accidents, allegations of assault or harassment, someone working in their home getting injured, and someone underinsured causing harm to them, the report states. “Damage awards are rising dramatically for a number of reasons,” according to Laila Brabander, head of North American personal lines claims for Chubb. “Economic damages historically were based on factors such as the extent of an injury and resultant medical expenses or past and future loss of income, but we are seeing a rise in non-economic damages, such as pain and suffering and PTSD, that overshadow actual economic losses.”

Wealth in North America

“There are more millionaires in North America than ever before,” the report states. “Between 2019 and 2022, the number of U.S. households with net assets over [$1 million] leapt by 63%, according to the U.S. Federal Reserve.” Likewise, in Canada, the number increased by 23% in 2021 alone, according to Credit Suisse estimates. However, a Chubb survey found that two-thirds of millionaires do not consider themselves wealthy, “including many with investable assets of more than $10 million,” despite having the ability to afford luxury goods, fine art, multiple homes, and much more.

About The Authors
Angela Sabarese

Angela Sabarese, Associate Editor of CLM. angela.sabarese@theclm.org

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