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| Risk & Reward |
Insuring Our Personal Security
Rebecca Fannin
04/01/2004
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Premiums and Profiles
Premiums for this coverage depend on a person’s risk
profile, according to Ross Buchmueller, president of AIG Private Client Group.
Insurance agents are notably closed-mouthed about the actual numbers, but
Buchmueller says the annual premium can range from tens of thousands of dollars
for someone who has a low-risk profile—but who might nevertheless want to be
insured on occasional trips to Caracas—to hundreds of thousands for high-risk
individuals, a term that can include not only those who travel frequently to hot
spots but also to people in the public eye: prominent executives, habitués of
the A-list party circuit, and heirs who indulge in Paris Hilton-style exposure.
Buchmueller says for most of us, $5 million to $10 million worth of K&R
coverage is adequate. FleetBoston’s Greenberg puts the top figure a little
higher: “A rule of thumb is that $5 million to $25 million of coverage is
enough, independent of net worth.”
Most wealthy individuals are less concerned with
the premium and manuscript
of the policy than they are with the advice they receive. |
Despite growing awareness of them,
K&R policies remain relatively rare. Buchmueller estimates that fewer than 5
percent of wealthy individuals purchase kidnap and ransom insurance. Some of us,
he notes, may feel that just buying one of these policies will make us a target
for savvy kidnappers who somehow discover that we are covered. “Many probably
feel safer not buying it,” Buchmueller admits. Also, we must keep these policies
secret; they usually have a provision that allows the insurance company to
refuse to pay if it can prove the insured told anyone about the
insurance.
Holistic Appeal
We should weigh these drawbacks
against the advantages of the policies, which go beyond the peace of mind of
knowing that a ransom will not wipe out our estate. Most K&R policies cover
not only the ransom, but items such as the cost of hiring a professional
negotiator to free the hostage, counseling for family members and the victim,
and medical conditions related to the kidnapping. Insurance companies also
review our security arrangements with the help of top-rated security firms. AIG,
for example, uses Kroll Associates, the well-known global detective agency;
Lloyd’s uses the Controlled Risk Group and Chubb uses Ackerman and Associates.
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