Standard homeowner’s insurance policies offer sound financial protection for most people. However, those who own large homes that would cost upwards of $500,000 to rebuild may have special coverage needs for which the standard policies were not designed. Such homeowners may own expensive jewelry or have costly business equipment at home, or they may be involved in public activities that make them targets for lawsuits. People with these exposures to financial loss may want to consider buying a high-value homeowner’s insurance policy.
Some of the additional coverages that insurance companies provide in high-value homeowner’s policies are:
Extended rebuilding cost. If a fire destroys the home and the policy limit does not cover the entire cost of rebuilding, this coverage will pay for the additional amount. Some policies pay as much as an extra 100 percent of the insurance on the home.
No requirement to replace or rebuild. A standard policy may not pay the entire replacement cost of damaged structures or contents unless the owner rebuilds or replaces them. High-value policies may waive this requirement and pay the replacement cost regardless of what the owner decides to do.
Demand surge coverage. After a major disaster like a hurricane, labor and materials for rebuilding are often in high demand. As a result, the cost of rebuilding a home jumps. This coverage provides additional amounts of insurance to pay for the increased costs.
Rebuilding to code. If building codes have changed and increased the costs of rebuilding the home, this coverage will pay for those costs above the amount of insurance on the home.
Deductible waiver. Some policies waive the deductible if the amount of a property loss exceeds a certain level, such as $50,000. However, the waiver might not apply to losses from certain causes such as earthquake or a windstorm.
Excess flood coverage. Most homeowner’s policies do not cover damage caused by flood waters. The National Flood Insurance Program offers this coverage, but the most insurance it offers is $250,000 on a home and $100,000 on contents. A high-value homeowner’s policy might provide as an option additional insurance that applies after the NFIP insurance is used up.
Backup of sewers and drains coverage. Standard homeowner’s policies do not insure against damage caused when a drain, such as a sump, backs up, though often the owner can buy this extra coverage. A high-value policy may include it automatically.
Electronic data. Some high-value policies may pay for the cost of restoring computer files and for costs resulting from theft of the policyholder’s identity.
Food. Unlike standard homeowner’s policies, a high-value policy may pay for refrigerated food that spoils when a covered cause of loss disrupts the power supply.
Lawsuits. Standard homeowner’s policies cover the costs of lawsuits and attorney fees only if they result from bodily injury or property damage the policyholder may have caused. High-value policies may go beyond that, covering alleged acts of libel and slander.
Higher amounts of coverage. High-value policies may cover some of the same things that standard policies cover, but for higher amounts. For example, these policies may provide more coverage for valuables, such as jewelry, furs and collectibles. They may provide more coverage for the expense of living elsewhere while the home is being repaired, more coverage for loss assessments from a homeowner’s association resulting from an accident, and more coverage for business property kept in the home.
Homeowners who think they may need this kind of additional coverage should consult an insurance agent. Many insurance companies are now offering high-value policies. It may well be worth a few minutes to review insurance needs and protect thousands of dollars worth of hard-earned property.