Wedding bells ring sales: the growing cost of getting married is creating a market for wedding insurance. (Property/Casualty).

When Roger and Karen Sandau were planning their destination wedding in Maui, Hawaii, they felt they needed a way to protect their investment. After all, they were contracting with many unknown vendors and planning to travel a great distance.

"In doing our research, we realized there was a wide spectrum of wedding insurance options in the United Kingdom, but virtually none were available in the United States, which was surprising because the United States is a significantly larger wedding market," said Roger Sandau, chief executive officer of Robertson Taylor California Insurance Brokers.

As a result of their experience--including a mismatched schedule for the photographer and a dress store that closed before the bride's mother picked up her dress--Sandau felt a product was needed for the U.S. market. The WedSafe wedding insurance policy was born in October 2000 and is currently underwritten by Essex Insurance Co., a subsidiary of Markel Corp.

Creating niche markets--very specific products for very specific needs--is a growing trend, said Jeanne Salvatore, vice president of consumer affairs for the Insurance Information Institute. "If you are in the property/casualty business selling auto or homeowners insurance, there are only so many drivers or homes out there," she said. "So these niche products are a reflection of society. We're seeing an increasing number of companies selling products such as identity theft, pet health and adoption insurance."

Wedding insurance has been growing in popularity since its introduction to the United States because it makes sense for some people, said Salvatore. "Wedding insurance provides some financial protection for all of those nonrefundable deposits and can provide some peace of mind during a stressful time," Salvatore said. "However, many problems could be avoided if (consumers) checked out a business before purchasing any services."

What It Covers

Wedding insurance is designed to cover the possibility of cancellation or postponement for reasons such as the illness of the bride, groom or other key family member; the failure of a vendor to perform; the loss or damage to wedding attire and gifts, and for enhancing liability coverage available under typical homeowners policies. "What we're seeing right now is concern for military deployment, which the WedSafe policy covers if someone is granted leave and then unexpectedly called back to service," Sandau said.

Don Soss, national program manager at Fireman's Fund Insurance Co., estimates the growth rate of its wedding insurance product, Weddingsurance, to be 15% to 20% per year with premiums averaging $250 to $300. A minimum policy, which includes $500,000 in liability coverage and $3,000 in cancellation coverage, would cost about $195, he said. Premiums tend to average about 1% of the total bill, considering a typical U.S. wedding costs $25,000 to $30,000.

A consumer would buy wedding insurance for several reasons. "They find out that the facility holding the event requires liability insurance or that the facility needs to be named as an additional insured," Soss said. "Many homeowners insurers either don't have or don't allow that endorsement." As well, the increasing costs of weddings may make insurance-conscious people willing to insure their nonrefundable deposits, he said.

Minimal Underwriting

Underwriting for wedding insurance is relatively minimal, Sandau said. The only information required is the name and address of the insured and the venue, the insured's relation to the bride and groom, the wedding date and the number of people attending the reception. Additionally, WedSafe asks about wedding expenses to ensure adequate coverage. "We want people to be able to purchase this product as easily as possible and not put up barriers," Sandau said. "A lot of people making that first deposit are looking for a way to protect against cancellation or postponement. To require extensive underwriting information would frustrate consumers' ability to protect the deposit."

As well, it would be very difficult to develop a checklist that would be comprehensive enough to identify every potential exposure that could give rise to claims under these policies and for the premium levels, said Gary Micetich, senior vice president of Essex Insurance. "We write the policy to exclude all those scenarios that are not priceable, such as moral hazards." That leaves a finite set of exposures and, even though a reception hall's financials haven't been underwritten, the exposure remains remote enough that we are generating sufficient premiums for the anticipated loss frequency, he said.

Both Fireman's Fund and WedSafe use event vendors, such as catering halls, as the primary sales channel for their wedding insurance products. "We have a disc jockey program; we insure them and they help us sell wedding insurance," said Robert Nuccio, president of R.V. Nuccio & Associates Inc., the program administrator for Fireman's Fund's Weddingsurance. Also, many facility owners, such as bed and breakfast inns and homeowners insurers that don't want to extend liability coverage away from the policyholder's residence, are referring clients to the Fireman's Fund product, he said.

"In many ways, [wedding insurance] is reflective of the growth of travel insurance as consumers realize what it covers and that the coverage is absolutely desirable due to the level of spending on weddings," Sandau said. "Many people overextend themselves to have the wedding they dream about. If anything should befall that wedding, requiring postponement or cancellation, they may not be able to have the financial resources to duplicate it on another day."

Wedding insurance safeguards the investment made in a wedding, as well as liability issues arising out of a situation such as a car accident, Sandau said. "You don't need a disaster on your hands for this product to be important," he said.

A Typical Wedding Bill

The average cost of a wedding in the United States is estimated between
$25,000 and $30,000, and is highly dependent on the style of the
wedding, size of the bridal party and the number of guests.

According to the Web site, www.topweddinglinks.com, an average wedding
could cost:

Category                            Amount

Invitations, Announcements and        $350
Thank-You Notes
Flowers                               $800
Photography                           $800
Videography                           $700
Music Entertainment                   $900
Officiant/Ceremony Site Fee           $400
Limousine                             $450
Gifts for Attendants                  $400
Wedding Rings (for Bride & Groom)     $500
Engagement Ring                     $3,000
Rehearsal Dinner                      $750
Bride's Gown                          $900
Wedding Veil & Headpiece              $200
Bridesmaids' Apparel                  $900
(for five bridesmaids')
Mother of the Bride's Apparel         $250
Groom's Rental Tuxedo                 $100
Groomsmen's Rental Tuxedos            $500
Wedding Reception                   $8,000
Honeymoon                           $5,000
Total                              $24,900

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Although the premium volume for wedding insurance is growing, there are mixed perceptions as to its profitability and success.

"Profitability on the WedSafe program is probably higher than most other products because the sale takes place mostly online," said Roger Sandau, chief executive officer of Robertson Taylor California Insurance Brokers. "We provide live customer support for clients, but information is disseminated online, so the transaction costs from a brokerage standpoint are really reduced."

Robert Nuccio, president of R.V. Nuccio & Associates Inc., the program administrator for Fireman's Fund's Weddingsurance, isn't so optimistic. "We got hammered on Sept. 11," he said. "I never contemplated that all the airports could shut down at one time. And that's a covered loss." Even if the events of Sept. 11 were removed from the company's results, the company is now faced with potential claims from the activation of military personnel, as well as the storms that ravaged parts of the United States in 2001, he said.

As well, Nuccio said that it's an adverse selection situation because those who know there is a high likelihood of loss want the coverage. So Fireman's Fund uses significant exclusions to classify potential causes of losses as "known circumstances," which would not be covered, through a self-rating worksheet available online. "Exclusions are used to offset adverse selection, like the situation with military personnel or serious illnesses with key players," Nuccio said. "We question [the insured] on the circumstances and if there's a possibility that the bride's father may die from cancer, that's a known circumstance."

"There's no other way to do it," Nuccio said. "Because the minimum premium is $195, how much underwriting can you do?" So, little by little, the company is eliminating areas of adverse selection, but every time there is a change in language, the company has to file in all 50 states, he said.

And although the majority of the sales process can be done online, it can't necessarily be completed online, Nuccio said. If a customer indicates a known circumstance or doesn't fully complete the application, then someone must call the customer. That adds to the line's expense ratio and ultimately its combined ratio.

Fraud also is a serious concern for Nuccio. "We eliminated much of the fraud by eliminating the change-of-heart cover," he said. "However, customers will read through the policy to find things that should be covered and file a claim." One example Nuccio offered was of an insured claiming his grandmother was in a Korean hospital, which would be a covered loss. When pressed for additional information such as the hospital's name, however, the insured never called back.

The desire is to pay on claims that do arise from unknown circumstances, Nuccio said. "But when you have a new product like this, you just don't know. We keep getting tabbed for losses that are known circumstances, but which we didn't intend to cover," he said.

Nuccio sees a slow growing future for wedding insurance. "It's a logistical nightmare. There are few shops that can afford to write a $200 policy and pay a commission on it," he said. "We want to sell directly on the Internet, but the client has many questions because it's a new product." Even a homeowners policy doesn't get as many questions because it's been around for so long, he said.

A Typical Policy

Wedding insurance, a form of special event insurance, dates back to the late 1980s and was created in the United Kingdom by an underwriter at Cornhill Insurance plc after attending the wedding of a neighbor's daughter, said John Kozero, a spokesman for Fireman's Fund Insurance Co. The wedding had been postponed, causing the father of the bride to lose substantial deposits.

So the Cornhill underwriter developed a product to protect the large expenditures made when planning a wedding--such as deposits on reception halls and wedding attire. When Fireman's Fund was acquired by Allianz Aktiengesellschaft in 1991, the two companies developed a similar product for the U.S. market.

Wedding insurance is designed to cover losses that arise from circumstances outside of the insured's control. For instance, Roger Sandau, chief executive officer of Robertson Taylor California Insurance Brokers, who sells the product WedSafe, recalls one wedding where the reception hail burned down a few months before the wedding. "Although the venue returned the deposit, the couple had to reprint the invitations showing the new location," he said. "Without their WedSafe policy, the couple would have had to cover this cost from their own resources."

A typical policy usually covers the following:

* Reimbursement of nonrecoverable expenses incurred because of postponement or cancellation due to an unforeseen event such as an illness, injury or severe weather conditions;

* Reimbursement for additional expenses to avoid a covered cancellation or postponement;

* Liability coverage against injuries to guests, including alcohol-related accidents, and property damage coverage for the reception venue or for rented property, such as a tent;

* Loss of deposits due to a vendor going out of business;

* Lost or damaged wedding rings, attire, photographs, video and gifts; and

* Counseling for emotional stress following the cancellation of a wedding.