According to Nationwide® two out of three homes in America are underinsured for more than 20% of their value and as much as 60% in extreme cases. The best way to determining if you have adequate insurance protection is to consult with a licensed insurance professional to identify any shortfalls of coverage. Be prepared for the consultation by performing a detailed assessment of your home and personal property items to verify the value of the structure and the home’s contents.
The Texas Department of Insurance provides an inventory form that will help you with completing a home inventory. Having your home professionally appraised by a state licensed appraiser is a great way to:
- Validate current market value of your home
- The cost to rebuild in case of a loss
- Provide the information you will need to decide whether you should accept a cash settlement if your home is a total loss
Your assessment must include specialty items such as fine art, valuable jewelry, luxury and classic automobiles, and stamp and coin collectables. We refer to these items as personal property because they are not permanently attached to the home’s structure. Don’t overlook valuables that may be stored in closets such as designer clothing, purses, shoes, etc. You should give attention to the value of high end appliances and accessories that are typically featured in luxury kitchens. Brands such as Sub Zero, Wolf, and Cove in the kitchen and Optoma and Acapalla Arts in the home theater cost thousands of dollars more than their counterparts found in traditional houses and can contribute substantially to the overall value and replacement costs.
To authenticate your artwork and collectables start by putting together all the required documentation to show that the piece of art belongs to you and its current worth. These records include provenance, bill receipt, an estimate for replacement, photos, and the most recent appraisal. Once organized, all these documents can be stored in software such as Artwork Archive, at an offsite location or in a fire protected safe within the home. Depending on each insurance company’s underwriting viewpoint, you should validate value and update your appraisal documents regularly as their values increase. Take the lead for this from your insurance company or better yet, a licensed appraiser or an art or antiquities expert.
Now that you have a value established for your home and its contents, it’s a good idea to have a similar onsite review performed by your insurance provider. A side by side comparison of these two reviews will identify any differences between your assessments and the insurer. Any gaps of coverage should be identified and closed with additional coverage before a catastrophic event occurs.
The next logical step is to perform a detailed review of your existing insurance policy and its levels of coverage. Read the policy carefully and get a clear understanding of your coverage limits within these standard home insurance categories.
• Dwelling
• Other Structures
• Personal Property
• Loss of Use
• Personal Liability
• Medical Payments
Having coverages in each of these categories doesn’t guarantee adequate protection. For example, a “Loss of Use” benefit for two weeks is not sufficient if your house is a total loss and uninhabitable for 6 months or more. You will need to address this short fall and extend the coverage to give you and your family sufficient time to cover your alternate housing expenses.
Why you need high value insurance coverage
Most standard insurance policies are inadequate for homeowners who maintain high value properties over $1 million. Casualty losses can be significantly higher for luxury homes which is why they should maintain “High-value Home Insurance”. Luxury home insurers such as CHUBB, AIG, Pure Insurance, and VAULT focus on extreme levels of coverage and much greater asset and owner protections. They cover fine art, luxury automobiles, valuable jewelry, and other fine collectables such as coin and stamp collections, which could collectively exceed the value of the home.
High value homes also come with additional features outside the primary residence. These features are often referred to as outbuildings or out structures. They include buildings such as stables for boarding horses, a greenhouse, gazebos for outdoor entertainment, and extended patios for recreation, meals, etc. Each of these features will add value to the home but they carry a liability risk of injury to guest and an increase in loss if damaged or destroyed. A standard insurance policy will offer limited or no coverage for these amenities.
What high value insurance covers that standard insurance excludes
The distinction between standard insurance and high value insurance is significant and can bridge coverage shortfalls and save the luxury homeowner tens of thousands of dollars when resolving a claim. High value insurance policies allow for customization and expansions of coverages not available on a standard insurance policy such as:
Comparison of Standard Insurance Versus High Value Insurance
High Value Insurance Coverages
Guaranteed Replacement
Allows for 100% of the replacement cost to rebuild even over policy limits.
Cash Settlement
Pays 100% of the cost to rebuild your home in case of a total loss.
Deductible Waiver
Typically waived on claims over $50,000
Broader Liability and Personal Injury Coverage
High value policies offer significantly broader protection and will cover defamation, libel and slander claims against the policy holder.
Customized Coverage Limits
A high value policy allows you to set coverage limits specific to your needs.
Standard Insurance Coverages
Guaranteed Replacement
Replacement is set according to policy limits with no consideration for increased building costs.
Cash Settlement
A standard policy pays only the depreciated amount of the house's value and contents which could be 50% of the cost to rebuild and replace its contents.
Deductible Waiver
Deductibles are established based on the policy parameters and are not waived.
Broader Liability and Personal Injury Coverage
These coverages are excluded from standard policies
Customized Coverage Limits
Standard policy limits are fixed at a percentage of dwelling limits
Most luxury homes are regularly updated and upgraded with the latest available features. Remember that even small changes can increase your home’s value and require additional insurance coverage.