Queen City Risk Management

(716) 970-4200 • jason@queencityrm.com

What Makes High Value Homeowners Insurance Different?

High Value Home Insurance distinctively offers coverage that a Standard Homeowners Policy will often fall short of covering. It is designed to fill coverage gaps and increase limit amounts to cover high end personal belongings.

 

Owners of high value or luxury homes also own precious jewelry and expensive collection items which factor into the “contents” a policy covers. Owners also put careful detail into the design of their homes such as vaulted ceilings, marble floors, designer kitchen cabinetry, high quality granite countertops, and crown moldings to name a few. With a Standard Home Policy, owners must purchase endorsements (aka “riders”) to cover personal items that exceed the coverage limit. If you own a collection of expensive items, even an endorsement within a Standard Home Policy would be insufficient to cover the additional value. With High Value Home Insurance, you wouldn’t need the endorsements since most policies will fully cover those high priced personal items.

 

In a High Value Home Insurance Policy, you would have the option of covering the entire cost of rebuilding your home to its previous state in case it was completely damaged.  

Here are some examples of coverages and features that are unique to High Value Homeowners Insurance:

  • Backup of sewers and drains coverage. Damages caused by sewage or drain backup are typically available as additional coverage in a Standard Homeowner’s Policy. However, most High-Value Policies already include it automatically.

  • Demand surge coverage. In widespread disasters like an earthquake, a demand for materials and labor can increase their price which also affects the price of rebuilding a home. This coverage provides increased insurance to cover the increased costs.

  • Electronic data. Some high value policies may cover the cost of restoring digital files and for costs associated to identify theft.

  • Excess flood coverage. Most homeowner’s policies do not cover damages caused by a flood. The National Flood Insurance Program offers this coverage up to $250,000 on a home and $100,000 on contents.  While this would be an additional policy it is worth looking into.

  • Extended Replacement Coverage. This guarantees a certain percentage over your limit on the coast to repair your home to its previous state.

  • Food. High-value policies may pay for refrigerated food that spoils when a covered peril disrupts the power supply.

  • Higher amounts of coverage. High value policies may have higher amounts of coverage for the same things within a standard policy. For example, these policies may have higher caps on coverage for jewelry, and other personal property. They may provide more for temporary living expenses while the home is being repaired, etc.

  • Lawsuits. High value policies covers for libel and slander which go beyond the costs of lawsuits and attorney fees, which are covered in standard policies only if they result from bodily injury or property damage.

  • No requirement to replace or rebuild. This gives you the option to recover the dollar amount of the entire replacement cost. In a standard policy you would not recover the entire replacement cost of damaged structures or contents unless you rebuild the structure or replace the contents. High-value policies may waive this requirement and give you the option to choose how you recover the damages.

  • Rebuilding to code. This coverage pays for the increase in cost to rebuild a home if building codes have changed and increased the costs of rebuilding the home.

What’s Considered a “High Value Home?”

Home value considerations vary by location and by insurance company. These requirements can range from $500,000 to a minimum of $1 million for your home to be considered a candidate for High Value Homeowners Insurance. High Value or Luxury Home insurers typically conduct a complimentary professional property assessment to determine the value of your home essentially to assess the cost of replacing your home in a worse case scenario. They’ll appraise your personal belongings like jewelry, antiques, and collections, as well as the type of custom detail and materials in the construction of your home.

 

In most cases, your home appraisal will exceed the market value or price of your home, especially in cases where your property is located in a vulnerable area.  

What Does a Standard Homeowners Policy Look Like?

Insurers will package coverages differently but a standard policy will typically includes coverage within these categories:

1. Dwelling

Dwelling includes the physical structure of your property including its permanent fixtures, such as plumbing, electrical wiring, heating and air-conditioning systems. (Detached garages or gazebos usually require add-on policies and are not considered part of “dwelling” coverage.)

2. Personal property

Personal properly typically refer to the contents in your home. It can also refer to items you own which may be located away from your home: furniture, clothes, jewelry, home appliances, electronics, and other valuables. Most insurers cover up to 70% of your dwelling coverage, so if you are covered up to $100,000, your personal belongings will be covered up to 70% of that $100,000.  

3. Personal liability

Personal liability covers you financially for bodily injury or property damage caused by anyone in your home, including damage caused by your pets, on or off the premises of your home. Coverage includes payment for repairs, medical bills, legal fees and other costs related to the damage, typically up to $100,000.

4. Loss of Use

Loss of use covers your living expenses while your home is in repair. This covers the cost of meals, lodging, and other unexpected expenses associated with temporary living situations. Most insurance companies will cover you up to 20 percent of your homeowners insurance, within a time limitation.

The Basics of Homeowners Insurance

Regardless of your home’s value, the same rules apply when it comes to the types of perils covered, the types of policies offered, and the level of coverage you can choose.

Types of Policies

Named Perils (aka Broad Form) versus Open Perils (aka Special form)

A policy that provides coverage for physical damage done to your personal or physical property based on a specific list of disasters is considered a “Named Perils” policy. In other words, if the peril is written or stated on the form, your insurance policy will cover the damages done to your property. Correspondingly, if a peril is not listed on your form, your policy will not cover the damages.

On the other hand, an Open Perils policy covers any damage done to your property, unless otherwise specifically stated. If the exclusion isn’t stated on the policy, then your damages will be covered.

Types of Policy Forms:

Different Policy Forms define the types of peril or event that’s covered in a policy. It also defines that type of coverage, or payout, it provides.

HO-2: Basic policy

This policy is a basic, named-perils policy which covers your physical and personal property. It includes perils such as:

  • fire and lightning
  • windstorms and hail
  • explosion
  • riots
  • aircraft
  • vehicles
  • smoke
  • vandalism and malicious mischief
  • glass as part of the home
  • volcanic eruptions
  • damage from falling objects
  • and water damage from accidental overflow of plumbing, heating air-conditioning and household appliances

HO-3: Most common policy

This policy is an Open Perils policy and covers your physical and personal property for all perils listed in a HO-2 policy, plus others that are not mentioned in the list of exclusions. Some insurers will only cover personal property for certain perils.

HO-5:

This policy is more costly than an HO-3 but essentially has similar features. It allows additional non-excluded perils to cover personal property, as some insurers only cover physical property.

HO-8: Older homes and registered landmarks

This policy is a named-perils policy and covers only common perils for homes that are more than 40 years old. These homes typically would not qualify for a HO-3 and the payout is only the actual cash value, which is much smaller than the replacement cost.

Levels of Coverage (Payout Type)

In any type of homeowners policy you have the option to choose the level of coverage for your home. These 3 main levels of coverage are either already embedded in your terms of policy, or features you can add as an endorsement:

  1. Actual cash value - This type of policy accounts for any depreciation in the cost of labor or materials. You will only recover up to the depreciated amount.

  2. Replacement cost - This policy covers the cost of rebuilding your home and replacing your personal property, without any depreciation, up to the limit amounts.

  3. Guaranteed or extended replacement cost - This policy guarantees complete coverage to rebuild your home to its previous state, even if it exceeds the policy limit. It offers the highest level of protection and hedges against any price hikes in material and labor costs due to shortages linked to widespread catastrophes.

Things to consider with your high value or luxury home

Not all insurance companies and insurance products are created equal. An agent who specializes in high value homeowners insurance can help make the difference in helping you identify the policy that protects your deepest investments and maintains your standard of living.

Owners of high value homes typically request to include the following coverage in their policies:

  • Extended or Full Replacement Cost
  • Increased jewelry coverage
  • Personal Umbrella Liability in excess of 5,000,000
  • Equipment breakdown
  • Legal expense coverage
  • Unlimited Additional Living expenses

When looking for a policy, keep in mind that High Value Insurance should respond to your coverage needs in the event of a total loss, not just to maintain minor damages of water leakage or petty theft, for example.  In the event you have to file a claim, it should account for and reflect the right measure of damage to accommodate your lifestyle and financial impact.