Tips On Insuring Luxury Homes In A Down Market

Insuring high value real estate, or luxury homes, is becoming more complicated and detailed as we experience recent fires and an economic down turn.  Policyholders should review their homeowner’s coverage with their Agent or Broker at least once a year.

It is very important that your home is insured to value.  Are you aware that most home policies contain a “co-insurance clause” which requires you to insure your home 80% to replacement value or else the policy might not pay out?  This value has nothing to do with the current market value.

As we know many homes have lost market value.  But this is not the same as replacement cost for your home.  Replacement cost is the current construction rates in your area to replace your home.    If your home were to sustain major damage from a covered peril (like fire) then you will need adequate coverage to rebuild at today’s costs for material, labor, and building codes.

For luxury homes in high value markets, like Manhattan Beach, this becomes even more important, since replacement costs for new buildings are escalating faster than inflation.

It pays to work with an Agent/broker who has partnered with multiple A rated insurance carriers which may offer you multiple choices, in terms of price and coverage.  The value of offering various insurance companies allows you to select a competitive price and perhaps a high value insurance carrier, such as Chubb Insurance, Chartis Insurance, Ace Insurance, or Fireman’s Fund.  These insurance carriers offer specialized coverages for homes valued over $1,000,000 such as cash pay out option and large loss deductible wavier.

Additionally you should ask your broker to do a comprehensive computer workup for the replacement cost and a confidential risk analysis of your exposures to determine other types of coverage you may need.

This is a guest post authored by:

Cindie Carey

President of Ortega Ranch Insurance Agency and a Personal Lines Broker since 1984.  You may contact her at [email protected] or 949-218-1020