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HNW Risk Management at Home: Protecting Clients From Help and Contractors

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Imagine hiring a handyman to work on your roof and then having your teenage daughter kidnapped by him several months later. This nightmare scenario unfortunately happened to one well-meaning family. The story illustrates a frequently overlooked threat to families with substantial assets—the very people they hire to work on their homes, care for their children, or help with cooking, driving and other household tasks.

The busy lifestyles of high-net-worth clients often mean they rely on domestic staff, and their wealth allows them to undertake major improvements to their properties. While the vast majority of the people hired are trustworthy, the few ‘bad apples’ command a unique position to do harm. Domestic workers often have unfettered access to personal records that can be used to create fictitious credit cards and bank accounts, as well as knowledge of family activities and even the security code to the alarm system. Contractors and sub-contractors working in the home may gain similar access to such sensitive information. 

To evaluate job candidates, it is not enough to rely on the recommendations of friends or the vetting process of agencies. The untrustworthy ones simply fudge or hide the truth.  An astonishing 46% of employment, education and credential reference checks in the 2009 ADP Annual Screening Index reveal a stark difference between what the applicant provided and what the source reported. 

A few practical tips can be used to narrow the number of candidates to a manageable few.  

  • For domestic employees, always check references, and make a surprise visit to a potential employee’s home. It can reveal a lot.
  • For contractors, check for their names in the Yellow Pages and on the Internet; no presence may indicate a shaky operation.
  • Do not hire a contractor if the company accepts only cash, demands the job be fully paid up front, or asks you to obtain the required permits.
  • Check the Better Business Bureau about complaints lodged against the contractor.

The final vetting process should involve a background screen by a professional security consulting firm. Choose one that has the knowledge and expertise to analyze extensive search data and ensure that proper interviewing techniques are conducted, thus reducing potential liability from privacy and hiring regulations. 

In spite of the risks, very few high-net-worth clients take this final step. Many never consider the idea, and almost all would be surprised to learn that their insurance carrier is willing to help. A handful of insurers that specialize in serving HNW clients have formed relationships with firms that conduct background screening. We work with one called The Guidry Group. The service is provided on a complimentary or reduced-fee basis, depending on the client’s annual policy premium amount. 

High-net-worth families also should make sure proper insurance protection is in place, since no background screen can eliminate all potential loss exposures. Specialized homeowners policies for HNW clients often have added benefits such as up to $100,000 in expenses incurred because of identity fraud; up to $100,000 to pay the cost of private investigators, attorneys, travel and lost income involved in a kidnap/ransom crime; and up to $10,000 to cover the theft or unauthorized use of credit cards, the forgery of checks or negotiable instruments. Optional coverages worth considering will absorb expenses related to incidents involving a home invasion, child abduction, carjacking, stalking and other criminal acts, including the expense of a reward for information on the crime. 

By combining background screening and proper insurance protection, high-net-worth clients can have greater confidence that their family, sensitive personal information, and assets will be safe from untrustworthy domestic staff and contractors. 

Gary Raphael, Senior Vice President, Risk Consulting, has 23 years of personal lines insurance experience, with a special focus on property valuation, loss prevention, and claims management for affluent and high-net-worth clients.


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