It's not unusual for many high-net-worth families to ownmultiple homes – and increasingly in more than one country. Whetherthey live in those homes year-round or only occasionally, theyalways want to feel right at home.

This comforting scenario, however, is challenged by myriadproperty and liability risks that await them at every home. At eachdwelling, depending on its location, they are confronted by asubtly unique set of laws and regulations affecting how they managethat property, as well as those they may have in their employ forthat purpose.

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Added to these disparate challenges are constantly evolvingnational and local regulations, older homes with aginginfrastructures like plumbing and electrical systems, and the sheerdifficulty of communicating with contractors and domestic personnelfor whom English is not the primary language. Lastly, in eachregion there are different types of insurance regulations, as wellas insurance policy coverage terms and conditions. Obviously, thegreater number of foreign residences one owns, the more complicatedthis landscape of risk becomes.

An affluent U.S. buyer of a home abroad would be surprised athow different the rules are across the Atlantic or Pacific. Thispoint resonated during a recent meeting with James Wasdell, founderand director of Quantum UnderwritingSolutions, a London-based personal insurance brokerage firmthat serves an exclusively high-net-worth clientele.

James recalled a wealthy American client who purchased anhistoric fisherman's cottage as a holiday home in Devon on thesouthwest coast of England. “He wanted to do some minor renovationsto the property, and contacted English Heritage, the regulatorybody dealing with such requests,” James said. “The Heritage officercame to inspect the property and noticed that all the windows weredouble-glazed, which is not exactly historic. Unfortunately, theprevious owner had made the changes without contacting theauthorities. Consequently, the new owner had to replace all thewindows at a pretty significant and uninsured cost.”

A Parisian apartment building, adjacent to the River Seine.(Shutterstock)

Historic homes

Regulations governing the preservation of historic residences –of which there are many in Europe – are not to be trifled with. InEngland, such homes are registered on the Statutory List of Buildings of SpecialArchitectural or Historic Interest and are given a designationof Grade One, Grade Two and Grade Two Star.

Grade One homes are considered to be of exceptional historicinterest, and thus face the strictest rules regarding theirpreservation. Such dwellings range from 15th century castlesto vast estates like one sees on the PBS show Downton Abbey. If the home isdamaged, it must be restored to exactly the same condition usingtraditional materials and craftsmanship. Even the color of thepaint falls within the scope of the rules. The related expenses canbe sizable, particularly if not offset by specialized insurancecoverage. Failure to comply with the rules may not only result infines; the offender also can be jailed.

More than 90% of historic homes fall into the Grade Twoclassification, such as the aforementioned fisherman's cottage.Grade Two regulations require that the homeowner maintain theappearance of the home's historic look and details, hence the needfor single-paned windows at the cottage.

Similar rules exist in France and elsewhere across the Europeancontinent, with varying distinctions. Nevertheless, nearly allrequire the use of certain materials and the engagement ofspecialized craftsmen, depending on the age of the home and itshistoric value. “Such tradesmen are increasingly difficult to comeby, and in some cases, the particular craft may be dying,” Jamesnoted. “The fewer number of available craftsmen, the higher thecost of the service provided.”

Knowing these subtle nuances is further complicated by eachcountry's legalese, which may also be in a language other thanEnglish. Even dwellings that are not considered historic pose stiffchallenges, as much of the housing stock in Europe is older thanbuildings and residences in the United States, with outdatedplumbing, gas and electrical systems. James has several affluentclients from the states who own large apartments in Paris, wherethe plumbing systems are in particularly poor shape.

“Our biggest source of claims in the city is an escape ofwater—a burst pipe,” he explained. “These are expensive claims,too, as the homeowner may only reside in the apartment for a fewweeks of the year. By the time the leak is finally detected, thedamage is substantial—ruined rugs, artworks, furniture and othervaluable items.”

(Shutterstock)

Labor relations

Full-time domestic workers like cooks, gardeners and chauffeursinvite other financial exposures. Aside from the customarychallenges like the need to assess a job applicant's prioremployment history and possible criminal background, homeownersmust understand the unique labor laws that apply in each region.What is called “workers compensation” in the United States, forinstance, goes by other names abroad, such as “employer liabilityinsurance” in the United Kingdom.

Each law is different in ways small and large. In France, thewage replacement percentage for an injured or ill worker is lowerduring the initial days of disability, but rises as timeprogresses. Unlike in the United States, there is no waiting periodfor claimants to receive payments. In England, the employerliability insurance must be in place the second someone is hired,not the first day they report for work. Failure to have theinsurance policy bound and paid for results in a fine of 2,500pounds per day.

Meanwhile, new laws are constantly being written, while olderlaws already on the books are fast evolving. In England, recentlegislation called the WorkplacePensions Act requires all employers of full-time workers(including homeowners) to provide each worker a specific pension,depending on their occupation and income.

“Even a domestic house cleaner has to be provided a pension,assuming the worker is full-time,” James said. “While these costsadd up, what's worse is the pension enrollment process, which ishighly complicated and involves all sorts of expensive fees.”

Nor unexpectedly, insurance regulations also differ on acountry-by-country basis. When buying a home in the United Kingdom,for instance, the purchaser is legally responsible for the propertyfrom the date of exchange. “They are not obliged to purchaseinsurance, but it is advised that they insure, not only toliability, but also the structure itself,” said James. “Theexchange of contracts makes them legally obliged to purchase theproperty, even, if for example, it has been damaged in a storm;hence, the advice to insure it from the exchange,” he said.

Aerial view of the Tower Bridge area of London.(Shutterstock)

On the bright side, 80% of the wealthy American clientele atQuantum Underwriting Solutions tend to buy secondary homes inEngland and France —the “hot spots,” as James called them. Thislimits the aforementioned challenges in many cases to just theseregions. Nevertheless, the remaining 20% are buying homes acrossthe rest of Europe and other foreign locales, multiplying thedifferent risk factors. Just imagine the laws, regulations,languages and customs that may greet those buyers in Latin America,Asia or elsewhere.

In all cases, financial advisors should consider the myriadlegal, regulatory and insurance challenges prior to their clientspurchasing residences abroad. Valuable assistance is available froma few U.S.-based global insurance companies that have relationshipswith brokers on both sides of “the pond,” like Quantum.

Most important, these insurers, like those brokers, also arelicensed to issue policies in many foreign jurisdictions and havelocal offices staffed with underwriting, loss prevention and claimsprofessionals who are well versed in the local rules, customs andlanguage. This is the only effective way to help assure that theclient is protected by a seamless property and liability insuranceprogram for residences around the world in which the coverages andservices are consistent with the high quality they receive in theUnited States.

Such insurance specialists can help address and overcome thechallenges I've mentioned, from the highly complex regulations andlaws to insurance policy, pension and claim considerations. Theymay even be able to help with domestic employee backgroundchecks.

Once these issues are put in the hands of experts, a family cancomfortably enter their foreign residence and feel that they arehome once again.