If you own a high-value home, then this this is likely one of your largest investments. You want to make sure that you protect that investment for any loss in any situation. We specialize in writing high-value home insurance policies. We shop our clients with several of our insurance companies taking premium and coverage options in to mind. We would like to discuss some important items that you should take into consideration before insuring your home.
Dwelling Replacement Value- It is important that you have set your dwelling coverage at an acceptable limit so that if there is ever a total loss you will be adequately insured.
Replacement Cost Estimate:
A replacement cost estimate should be done to ensure you have the correct value. This is a program that should be run by your agent before issuing your home insurance policy. It takes into consideration the square footage and construction type of your home. It is very in-depth in determining what it would cost in today’s values what it would cost to reconstruct your home exactly as it stands today.
Do not get confused and take tax value, purchase price, or market value into account when determining the replacement value. These values can be vastly different than what a true replacement cost would be.
First of all, you want to eliminate land coverage in what you are insuring your home for. There are several areas, especially in Charlotte, where land value can be a large percentage of the overall market price of the home. You don’t need to over-insure your home when the land will still be intact even if you had a total fire loss. On the other end of that conversation, if you are using market value to assess the value of your home then you may leaving yourself with a big gap in the event of a loss. Market value especially at this current time can be much lower than the actual cost to rebuild your home.
Quality Grade: A quality graded is usually a higher grade on a high-value home than a standard home.
Builders grade takes into consideration the materials used and the fine details that builders use in constructing your home.
Different types of builders grades can commonly be referred to as:
- Above Average
Some examples of things that increase your overall builders grade of your home include
- crown molding
- tray ceilings
- cathedral ceiling
- transom windows
- picture windows
- marble floors or exotic wood floors
- stainless steel or high value appliances
- granite, concrete, or marble counter tops
- walk-in closets and custom built closets
- whole home speakers
- and many, many other items. The list goes on and on. The more custom your home in the build effort, the higher your quality grade will be.
Scheduled items or valuable items coverage- This includes items such as jewelry, artwork, silverware, guns, etc. These items have a maximum payout that may be limited under your normal personal property coverage. For example, on NC home policies, the maximum jewelry payout is usually $1500. It is for this reason that you would need them to be scheduled on to your policy at an agreed amount. Typically home insurance companies need to have a recent appraisal for every item of significant value that is to be added. Generally an appraisal in the last 3 years is sufficient.
Important endorsements and coverage options to consider:
This is a very important add-on to your policy for you to consider. The cost associated with water backing up into your house can be very high. This includes the cost of water damage to your flooring or walls. Most people don’t realize that this coverage is not covered on your standard home insurance policy. You must request it.
Scheduled items or valuable items coverage:
This was discussed earlier in this article and must be endorsed for any coverage to be paid more than the standard allowances.
Increased Dwelling Replacement Coverage:
You can further protect the insured value on your dwelling coverage to go above the estimated replacement value to ensure that you have covered your home for enough coverage on the building. Most companies will cover an additional 25% or 50% over what the replacement cost estimate is showing. These endorsements are pretty inexpensive to add and it will give you further peace of mind.
Liability coverage on your home insurance policy usually comes standard with $100,000 worth of personal liability coverage. It is highly recommended that you protect your assets by increasing this limit to a minimum of $300,000. You can increase this further to $500,000 or even $1,0000,000. That way if you are sued, your home investment is protected. You should also consider an umbrella policy which has been discussed in detail on one of our previous blogs on umbrella insurance. This policy will kick in and pay where your underlying policy stops.
Contents Replacement Coverage or Personal Property:
This is one area that you may be able to reduce your coverage under the common standard. Most home insurance policy covers the replacement of your contents at 70% of the value of your dwelling amount.
For example, if your home is insured at $1,000,000 then your contents coverage would be $700,000. Many people find that this is more coverage than they currently need. Ask your agent if you can reduce your personal property down to 50% which would bring your coverage in our example down to $500,000. This can reduce your premium. There is no sense in paying premium every year for coverage you don’t need.
OK, here is one that in NC is pretty uncommon. The likelihood of an earthquake is highly unlikely. However, there is no coverage for this catastrophic event under your home insurance policy in NC. If you are an overly cautious person, this may make you sleep a little easier at night knowing that you are covered.
Your home is filled with items of value that you must really consider when you are insuring your home. You don’t want to wait until you have had a fire to realize that you should have looked more closely at your coverages to make sure you were properly insured. You will likely not pay more attention at your coverages later, at least not in the near future. It is important to get it right when you are getting ready to issue your policy. Most people pay very little attention to their policies even when they receive a renewal offer in the mail. Protect one of your biggest investments and put in just a bit more time on the front end and you can rest easy.
Of course we are always available to answer any questions you may have. Please contact us at 704-494-9495 if so.