High-end Policies Don?t Have To Cost Collectors a Premium

If you have a million-dollar house with a Picasso painting on the wall, Carrie Sperling is here to help.

Sperling, a broker with Rebsamen Insurance Inc. in Springdale, is an expert at saving money on insurance costs for people who have plenty of money. Her agency has written policies in Arkansas for everything from Picasso paintings to Steinway pianos.

Sperling’s official title is “personal lines account executive,” which means she writes policies for personal property and liability. Sperling writes an average of two or three policies per month that carry premiums of more than $5,000 per year.

She wrote one of the largest personal-lines policies ever for Rebsamen, which amounted to premiums of more than $50,000 a year. Sperling said a premium of that size would include several cars, five to six homes, a boat, jewelry and a large umbrella policy including $5 million in liability coverage.

She wrote that policy in 2002, her first year at Rebsamen. The company is based in Little Rock and has offices in Springdale, Fort Smith, Springfield, Mo., and the Louisiana cities of New Iberia, Lafayette, Opelousas, Lake Charles, Baton Rouge, DeRidder and Alexandria. Rebsamen had revenue in 2003 of about $58 million.

Sperling specializes in high-end coverage of homes and personal property available through Chubb Group of Insurance Cos. and other personal insurance carriers such as Unitrin Inc., Metropolitan Life Insurance Co., Encompass Insurance, Travelers Property Casualty Corp., Safeco Corp. and The Hartford Financial Services Group Inc.

Chubb will insure homes with a minimum value of $500,000. Other carriers besides Chubb can write home policies that match the amounts that Chubb does, but they don’t provide the additional coverage, Sperling said.

Switch and Save

Sperling was able to save one client, who requested anonymity, $500 per year and give him 50 percent more coverage when he switched from one carrier to another.

“We are the 22nd largest [insurance] brokerage in the nation,” Sperling said. “We have an advantage over other smaller brokerages and direct writers, because we have appointments with most of the major non-direct personal insurance carriers.”

Rebsamen writes more than one-third of the Chubb policies in Arkansas and insures more than 50 percent of all publicly traded companies in the state. It is the largest independent insurance agent in both Arkansas and Louisiana.

Ray Dake, a real estate agent for Lindsey & Associates Inc. in Rogers, said he recommends Rebsamen to his clients because their rates are very competitive.

“Home insurance just adds to the monthly home payment,” Dake said. “[Sperling] represents quite a few different companies and can give a good price.”

Sperling is listed as Chubb’s agent of choice for Northwest Arkansas. AIG Private Client Group is the only other carrier that offers comparable coverage to Chubb, Sperling said, and is not offered in Arkansas.

Eric and Sativa Schabacker, owners of the Winterwood Lakeside Cottage bed and breakfast and the Winterwood Recording Studio in Eureka Springs, insured their 6,500-SF home and 2,500-SF cottage with Rebsamen after their rates with State Farm Insurance kept climbing.

“She was able to include coverage that State Farm was not,” Eric Schabacker said. “We own a bed and breakfast, a recording studio, as well as a home, so it was complicated.”

Eric Schabacker started in the recording business in 1962 in Orlando, Fla., and moved to Eureka in 1994. In Orlando, he created and owned two record labels, a recording studio and booking agency that worked with many famous artists over the years, including Gladys Knight, Michael Jackson, Judas Priest and Molly Hatchet. His studio now caters mainly to local artists.

With more than 20 years of experience, Sperling came to the area two years ago from Orange County, California, where she worked for a brokerage that designated a department to handle high net-worth clients.

“Rebsamen didn’t have a designated department here and I kind of grandfathered that to get it going,” Sperling said.

$1 Million Homes

More than 1,600 homes in the Arkansas are worth $1 million or more, according to Info USA, a research database company based in Omaha, Neb.

Northwest Arkansas is probably home to 150 to 200 of those mansions, Meza Harris, senior vice president of Lindsey & Associates in Rogers, said after conferring with John David Lindsey, managing broker and principal with the real estate company.

Harris said she will be closing on two $1 million-dollar homes this month, one in Rogers and one in Fayetteville.

“But I’m telling you, that’s pretty unusual to [close on] more than one in one month in little Northwest Arkansas,” Harris said.

Even so, Harris said buyers often think they have to shop outside the market, and agents even mistakenly think they have to look elsewhere for elite clients. Neither is the case, she said.

“They’re right here,” Harris said. “All the people who can afford them are right here, and I was born and raised in Bentonville, so you can imagine how it’s changed.”

The Northwest Arkansas Regional Planning Commission estimates that there were 214 homes in Benton and Washington County permitted for construction from 2000 to 2003 that had labor and material costs of more than $300,000. Usually, a home will appraise for more than the permit value.

With the increasing number of high-end homes, comes the need for high-end home insurance.

Purchasing Power

The estimated median household effective buying income (EBI, sometimes known as after-tax income) is $34,799 for the Northwest Arkansas metropolitan statistical area. Benton County is $38,799 and Washington County is $31,676. The state EBI average is $29,405.

The EBI for the Northwest Arkansas MSA is expected to grow 33 percent to $52,778 by 2006. The state EBI is expected to grow to $45,399.

For an example of a typical Chubb customer, Sperling created a fictional client who has a home security system and wants a $1,000 deductible insurance policy. For a home owner’s policy that includes $500,000 in replacement costs, two luxury vehicles, a $1 million umbrella policy and $25,000 in additional valuables such as jewelry, fine arts, sports memorabilia etc., the hypothetical premium would be $3,100 per year.

That included a true replacement cost with no cap and a cash-out option, which is only offered by Chubb and Traveler’s.

An umbrella policy extends liability amounts and encompasses all liability exposures such as cars, boats, rental homes, recreational vehicles, etc. Chubb offers umbrella policies with up to $10 million in coverage. Umbrellas include liability coverage.

Marshall & Swift/Boeckh, a leading building cost evaluation firm in Los Angeles, estimates that the replacement value of 67 percent of all homes is underestimated by 30 percent or more.

Sperling said homeowners can mitigate premium costs and maximize replacement values by putting all insurance coverage with one company and by going with a carrier that does not cap replacement costs.

If the value of a home is underestimated or overestimated, the customer could end up paying more than necessary in premiums or get less than their home is worth in the case of having to use their policy.

Many companies, she said, have a cap that averages 25 percent over the customer’s policy limit, that policy isn’t likely cover all the costs should something be lost.

Minimize Premiums

Here are some quick tips from Rebasmen Insurance in Springdale for mitigating high-end insurance premiums:

– Avoid duplication of coverage by picking one provider and stick with them for all coverage.

– Installing a security system and/or living in a gated community can save homeowners 15 to 25 percent on their premiums.

– Get your home appraised by a certified appraiser and insure it for the replacement cost instead of the market value.

– Ask about the recoverable value of irreplaceable items; cash-out options for things such as lost artwork or jewelry; extended replacements compared to true replacements and the average settlement times.

One Rebasmen client, whose home appraised for more than $1 million and recently had water damage, got a check within 48 hours.

Source: Rebasmen Insurance Inc. in Springdale.