Appraiser James King once tried to figure out how to value a Seattle
home's elephant skin wall coverings.
He recently appraised a $12 million home in Aspen that was built
from timber salvaged from the fire in Yellowstone National Park in
1988.
Another time he appraised a 50,000-square-foot home in Portland,
Ore.
Recently, King, armed with a tape-ruler, a pen, notebook and a laser
measuring device that tells him the square footage of each room,
appraised a Bonnie Brae home owned by Coldwell Banker agent
Susan Noble.
King is an appraiser for the Chubb Group of Insurance Cos., which
was founded in 1882 to underwrite cargo and ship insurance. The
firm is now part of a growing niche that focuses on insuring luxury
homes.
Best's Review, an insurance industry publication, said there are 7
million people worldwide with assets of more than $1 million, and
that is expected to grow by 12 percent annually.
``The accumulation of wealth is generally accompanied by a more
lavish lifestyle and more costly possessions,'' the article notes.
The magazine said the Chubb Group insures 70 percent of the 400
wealthiest people on the Forbes magazine list. Other insurance
companies that also target the wealthy include: American
International Group's Private Client Group, Hartford, through its
Distinct Advantage program; the Travelers High Value Home
Owners Product; American Mutual Insurance Co.; Fireman's Fund;
and State Farm.
Chubb insures about 9,500 luxury homes in Colorado. It has had an
office in Denver since 1967, though it's been selling policies here
much longer.
``We do an interior appraisal of every home priced over $500,000,''
said Mary Ann Avnet, a vice president of Liberty Corner,
N.J.-based Chubb, a publicly traded company with a market cap of
about $12 billion.
If the house is priced at less than $500,000, they send an appraiser
to drive by.
Chubb has carved out a niche insuring only expensive homes - from
$300,000 to $30 million.
In a rising housing market such as Denver's, many homes - especially
those with custom features - may be underinsured.
Avnet recently was told about a homeowner in northwest Denver
whose insurance adjuster told him that if his house burned down, the
company wouldn't cover the cost of replacing the handcrafted
drywall in his dining room. Instead, the inspector said, the company
would pay for the cost of regular drywall.
``That's a perfect example,'' Avnet said. Most insurance companies
will pay for the cost to rebuild or replace a structure with materials of
``like kind and quality,'' which may be far less than duplicating the
original.
That can especially be a problem in older homes, where the
craftsmanship may be hard to duplicate, said Kirk Yeager, assistant
commissioner for consumer affairs at the state's insurance division.
``Even if you have upgrades in a new home, it can probably be easily
reproduced,'' Yeager said. ``But if you're in an older home, and
something truly unique is damaged or destroyed, you could be in
some tough negotiations unless your insurance policy specifically
addresses that.''
For example, if you have 100-year-old wooden pillars in a Capitol
Hill home that are damaged, it might be hard to match the quality and
colors. The same could be true with old stained-glass windows and
other things that make your home unique, he said.
``After you talk to your agent, read the insurance policy again,''
Yeager said.
In rare cases, appraiser King said, Chubb has gone as far as to fly in
craftsmen from Europe to duplicate lost property. Sometimes tools
must be fabricated to re-create what was lost.
In some cases, consumers know their home is grossly underinsured,
but they don't want the insurance company to find out and raise their
premiums.
``That's the biggest mistake a consumer can make,'' Yeager said.
``Policies usually come with a penalty clause, and you may lose the
replacement cost.''
For example, if a home is insured for $100,000 and today it is worth
$250,000 and it burns down, an insurance company might give you
the ``actual value'' and not the replacement cost.
But before insuring treasured goods, consider the cost of the added
insurance, advised Jeanne Salvatore, spokeswoman for the nonprofit
Insurance Information Institute in New York City.
``Where I live, here in the Northeast, there's a lot of gentrification
going on,'' Salvatore said. ``People are moving into neighborhoods
that have traditional building. But they might have fabulous
hand-blown, stained-glass windows. The house might not be worth
as much as it would cost to replicate the windows.''
She said if the house burned down and the homeowner wanted to
recover the value of those windows they would likely find a company
to cover the risk.
``But you're going to pay a lot for it,'' she said.
Chubb insurance premiums typically cost 10 percent to 15 percent
more than what a standard insurance policy charges, Avnet said.
``There's a couple of insurance firms that have been targeting the
upper-end homes, but we find that most of our competition comes
from the larger insurance companies, such as State Farm and
Allstate,'' she said.
But more than just your house is protected with a Chubb policy.
About a year ago, it started offering coverage for kidnappings and
identity theft as part of its standard policy.
If someone starts using your Visa or Master Card, it is up to the
financial institutions to reimburse you.
But Chubb will reimburse you for time away from work,
long-distance phone calls, certified mail and other costs of trying to
correct the problem, Avnet said.
``Identity theft has been more and more in the news, and we did
some research and found it is being more and more common for
people in all income brackets,'' Avnet said.
Salvatore said that Travelers also offers identity theft insurance.
At the Bonnie Brae House, King went from room to room, noting
such things as the granite countertops in the kitchen with
``bull-nosed'' edges that would be more expensive to replace than a
simple straight-edge slab.
He noted that the doors upstairs were solid wood, while the ones in
the basement were hollow, thus less expensive.
In the master bath, he pointed to hand-painted tiles interspersed on
the floor with white tiles. He counted the number of smoke and heat
detectors and burglar alarms in the 4,000-square-foot house, which
can provide a discount on the premiums.
After completing the inventory, he went back to the office to start
figuring out the value of her house and contents.
He'll send the owner a bound book listing things such as special
features of the house, a breakdown on how much it would cost to
rebuild the home and recommendations on how to protect the home
from fire and burglary.
King said he usually can figure the value of even the unique features,
but occasionally he is stumped.
For example, he couldn't determine the value of the elephant-skin
wallpaper on the Seattle home. The unusual wall covering was
installed when the house was built around the turn of the century,
before restrictions on shooting elephants were in place.
``I couldn't come up with a comparable, so I told him we'd value it
the same as leather wallpaper, which is very, very expensive.''
