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Insuring the absurd

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Most of us Americans insure only the very basics: our homes, our cars, our health and, in some cases, our lives. Some of us, however -- particularly the rich and famous -- have invested serious cash into insuring other things as well such as high-value luxury items, collections and body parts.

This incredibly high-end subset of the insurance industry is known as "specialty lines," and there are only a handful of agents who sell it.

The Watkins Syndicate of Lloyd's of London is one of those agents. This is the entity that recently underwrote the $7.8-million policy on the nose of Ilja Gort, a Dutch winemaker. According to The Daily Mail, a newspaper in London, Gort took out the policy to reflect the value of his nose to his business.

Think it's cheap? Think again -- the coverage will cost the winemaker roughly $23,000 per year.

Other specialty lines policies have focused on different body parts. For example, when supermodel Heidi Klum signed a deal to promote Epilady, the product's manufacturer, Braun, took out a $1-million policy on her legs.

Music fans remember the reported $1-million rider that Jennifer Lopez took out on her derriere, and it was reported that artist Andy Warhol had a $1-million policy on his eyes.

(Neither of these policies ever was confirmed).

Then, of course, there was the policy the St. Louis Cardinals took out in 1998 on slugger Mark McGwire's ankle. The team had insurance on McGwire for most of his tenure with the team, but the original underwriter wouldn't include his ankle, which had proven to be susceptible to injury in the past. That's when a specialty lines agent stepped up to the plate.

According to Eli Lehrer, national director of the Center on Finance, Insurance and Real Estate at The Heartland Institute in Chicago, most specialty lines transactions are incredibly complex, simply because so much money is at stake.

He says that the McGwire policy, for instance, included medical definitions on the tendons and ligaments that were included in the definition of an ankle.

"If a policy is going to be highly customized, it needs to be as specific as possible," he declares.

Still, not all specialty lines products have to be high-end. Lehrer notes that unusual policies are becoming common among traditional insurance carriers, which means the prices are going down.

Two examples of this trend: USAA's Military Uniform rider for homeowners insurance (which provides first dollar replacement for uniforms ruined in battle), and Progressive's new policy that covers injuries to pets in automobile accidents.

In both cases, Lehrer says that simply by offering the specialty lines products, insurance brokers are providing themselves with an advantage over their competitors.

"Progressive's pet auto insurance gives them an advantage because it doesn't cost them a lot to offer, because it's a consumer benefit and because it gives them a reputation as a company that likes animals," he says.

Still, specialty policies aren't for everybody.

For more prosaic types of coverage -- i.e., the only coverage most of us need -- it's probably not a good idea to base carrier decisions on the available specialty coverage.

Lehrer says that few of these coverages have huge value by themselves, and adds that "other things such as overall company service and solvency are a lot more important than the fact that you might get a few extra dollars for Fido's vet bill."

Or for a bruise on your rear.

This article is provided by InsWeb. Find great rates on auto insurance, home insurance and term life insurance by comparing quotes from multiple providers at InsWeb.com.