If you think the rich and famous aren’t that different from the rest of us, you should read their insurance policies.
Welcome to the world of specialty lines insurance.
When clients want to cover extraordinary possessions, like high-value luxury items, collections or body parts vital to their livelihoods (think concert musicians), they don’t just drop into the local insurance office and sign on the dotted line.
Instead, an individual might purchase a separate policy, often called a rider, to cover the item. And, if the situation is really unique, it might be handled by a company’s specialty lines department.
And this isn’t off-the-rack coverage. Insurance agents who work in this area often develop a special talent for troubleshooting and problem solving, which comes in handy when policies are custom-tailored for out-of-the-ordinary items and situations. (To compare insurance policies and quotes, visit Insureme.com, a Bankrate company.)
“I love being a part of it because you get to see stuff that hasn’t been done before,” says Eddie Floyd, managing director with Kemmons Wilson Insurance Group, a Memphis, Tenn.-based insurance company. “Our clients are fun to work with.”
Some of the more extraordinary items insurance companies have underwritten:
A railroad car. Not just any railroad car though. Purchased by a billionaire and retrofitted at a cost of nearly $7 million as a luxury motor home on the rails, this car could qualify for its own episode of “Cribs.” “It’s absolutely amazing,” says Floyd.
Oddly enough, the owner wasn’t seeking insurance on the car itself. But the railroad required that he carry $100 million in liability because his eventual goal is to hitch the car to existing lines, says Floyd. As a result, the premium is roughly $150,000 annually.
Those eyes. One pop artist, who specializes in street art, insisted on insuring his eyes for $1 million because they gave him his unique artistic vision of life. “He said that he could see things differently through his eyes than any other person,” says Floyd.
With some body-part policies, there’s “no real risk” for the insurance carrier, adds Floyd. Often, there are so many exclusions in the policies that “it would take a near-perfect claim situation to make it pay out.” So high-dollar coverage doesn’t automatically come with high premiums.
That nose, that mouth. Ilja Gort, a Dutch winemaker who owns Bordeaux’s Chateau de la Garde vineyard, recently insured his nose for a cool $7.8 million “to reflect the value of his nose to his business,” says Jonathan Thomas, lead underwriter for the Watkins Syndicate of Lloyd’s of London. But his policy is not just for show. Coverage will cost the oenophile roughly $23,000 annually.
But it’s worth it to Gort. “He is adamant that the only thing he needs to do his job is his nose,” says Thomas.
Perfumers and tea samplers (the people who taste and test various types of tea) will sometimes take out similar types of policies, says Thomas. Before writing the policy, the carrier will often send the individual to an ear, nose and throat specialist to set a baseline for their olfactory abilities. The person will smell what appear to be “a whole lot of felt-tip pens” that have been imbued with various scents. “And some are pretty extreme smells that you can’t fake,” Thomas says.
British wine taster Angela Mount insured her sense of taste, which included a combination of her taste buds and nose, for roughly $19.8 million U.S. at current exchange rates, says Thomas. The annual premium was equal to more than $39,000.
Those gams. A 20-something leg model (who estimated she had another five to seven years in her career), insured her valuable gams for $989,000 — a realistic estimate of what she can expect to earn during that time, says Thomas. Her annual insurance bill: about $3,500.
And when supermodel Heidi Klum signed a deal to promote Epilady, Thomas says the product’s manufacturer, Braun, took out its own million-dollar policy on those famous legs “to protect her contract.”
That ankle. Remember Mark McGwire and Sammy Sosa’s 1998 race to break Roger Maris’ home run record? What you may not have known is that there was a special policy on Mark McGwire’s ankle, according to Thomas.
Apparently, the Cardinals had insurance on McGwire, but the underwriter wouldn’t include the would-be home run king’s ankle, which was giving him trouble at the time. So Thomas says Lloyd’s stepped in with a policy to cover only that specific body part.
But writing a policy for just an ankle is a lot more complicated than you might imagine, he says. To draft it, they had to set out, in detail, which tendons and ligaments were included in the definition of “ankle.”
And McGwire is not the first or last baseball player to require special treatment in the insurance arena. Thomas says one team wanted to insure a player for the amount of his multiyear, $200-million-plus contract, but the team’s owner was unable to find that coverage “at the price he wanted to pay.”
So a number of insurers, including Lloyd’s, joined forces to cover the risk together, up to a total of $120 million-plus, he says. The annual bill? More than 2 percent of the sum of the insured, he says. Translation: more than $2.4 million annually.
A princess and a judge. A South African soap maker insured Princess Diana for two months back in the early 1990s, says Thomas. The most extraordinary element of the policy is that the princess probably never knew anything about it.
The soap manufacturer put 400,000 rand (about $51,000 U.S.) into an eight-week ad campaign that used a Diana look-alike. But if anything happened to the real Diana, the company worried it would have to pull its ads and would lose its investment, he says.
So it took out a policy on the princess that started at $53,000 and declined every week, to match the money it still had in the ad campaign.
A similar policy was issued for a judge in a high-dollar civil trial in the mid-1980s by one of the parties in the suit, says Thomas. Both sides had spent millions presenting testimony, and it was feared that the money would be lost if anything happened to the judge during the course of the proceedings.
A contract: When a big-name talent signed on for an extended Las Vegas schedule, part of the agreement was that the entertainer would accrue ownership in the performance venue. “It was guaranteed” whether the entertainer could perform or not, says Thomas. And the resulting contract was worth “in excess of $75 million” at the time, he adds.
So Lloyd’s was called on to cover the majority of the contract. The shows did go on, says Thomas, and “the contract has run its course.”
Dana Dratch is a freelance writer in Roswell, Ga.