High-Value Home Insurance: Does Your Home Qualify?

Feb 5, 2020 | Personal Insurance

“It only takes a spark to get a fire going and soon all those around can warm up in its glowing. That’s how it is with God’s love, once you’ve experienced it. You want to sing, it’s fresh like spring, you want to carry on…” and so the Christian song goes. 

No one can say for certain how it all started. Some say it came from an unattended campfire, maybe from a discarded cigarette butt, a downed powerline even, or something seemingly harmless, such as a car that ran a flat tire and where the metal rims coming in contact with the asphalt, caused a spark. Early humankind history has always known lightning to be the usual cause of wildfire eruptions. Recent studies, however, attribute 84 percent of these instances to human actions, or in certain cases inaction.

What is known as a fact of the 2018 California wildfires, is that it occurred in the northern portion of the state sometime in mid-July. It was a bone-dry summer then. In fact, two months leading to the catastrophe, the area received less than normal precipitation and came to be one of the warmest Summer on record. Thus, the above-average temperatures made for a tinder-dry forest with an abundance of dried up grass and brush, and worst, dead tree fuel – loads of it, or to be precise, some 129 million dead trees, as of December 2017.

Responding firemen also noted 35 miles per hour winds that fanned the flames towards the small towns. The days saw the gusts peaking at 60 to 70 mph. Geographer Jacob Bendix of Syracuse University described it as “conditions primed for fire”. Meteorologist Craig Shoemaker, on the other hand, was quoted as saying that in the past, Autumn rains would have normally ended the fire season at least a month earlier. Further describing the condition brought about by the series of unfortunate events as akin to a “matchbox” and is “unprecedented”.

The Mayor’s “Last Stand”

The 2018 California blaze was by far the deadliest and most destructive wildfire that happened in the state. At its worse, the size of sixty football fields were going up in flames every single minute. No one was spared. Even the rich and famous were victims, as well. The likes of Hollywood superstars Gerard Butler, Orlando Bloom, Alyssa Milano, Pop icons Lady Gaga and Miley Cyrus, and R&B singer Robin Thicke were all affected and had to, together with hundreds of families, leave their homes and escape the oncoming inferno.

Even the Mayor of Malibu that time, Jefferson “Zuma Jay” Wagner, had to put up a stand himself. Prior to being elected as mayor, he ran a surf shop since the 1970s. His house sits on a rural canyon a few miles off the coast from Surfrider Beach. He was as true blue as any Malibu resident can get. So when he saw the blaze crawling towards his home of 44 years. Mayor or not, he decided to put up a fight. Armed with a garden hose, he sprayed areas around his property attempting to prevent the advancing fire. When at last he thought his place was saved, he would notice that a section of his roof had already caught fire. 

As he was attempting to shoot water up his ceiling, a section of the structure came down and knocked him down. He barely made it out alive. Thankfully, he had the presence of mind to follow the hose out of the house. Mayor Wagner had to spend three days at the hospital for Carbon Monoxide poisoning and some damage to his kidneys. What would hurt him more than the injuries and burns, was the fact that the insurance company refused to pay for reconstruction. He is not alone as some 700 families with similar claims were also rejected by their insurers.

Many like Mayor Jefferson Wagner have begun reconstruction while the legal suits are ongoing. They are hoping that their appeal to the insurers will be reconsidered and they may make a claim for the reconstruction costs and legal fees they incurred.

Insurance as a Back-up Plan

Wikipedia defines Insurance as a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss”. It is an agreement between an insurer and insured, by way of a policy contract, where the latter gets financial protection in the form of a guarantee of reimbursement or remuneration from the former, in the event of a specified loss. Such as loss, damage, sickness, death, etcetera. In simpler terms, insurance acts as a back-up plan should things go south, such as in the case of the victims of the 2018 California wildfires.

Mayor Wagner admits that he never saved up for his retirement years. At 66 years old, his retirement was going to be his upscale Malibu home. Other than that he but managed to invest in one other piece of property, a condominium unit in the city. For many, having a home in Malibu, California means a chance to rub elbows with the rich and famous. Hollywood actors and actresses, entertainment industry moguls, and sports stars could very well be your next-door neighbor. If that doesn’t appeal, maybe 21 miles of coastline, or what the city terms as “21 miles of scenic beauty” coupled with Mediterranean climate might tickle your fancy.

There is a saying that goes, “the bigger they are, the harder they fall”. In the case of upscale homeowners, the bigger the house and the fancier the interior, the risk of suffering financial loss may be gargantuan. However, for insurance “non-believers”, paying for something intangible may be a bitter pill to swallow. More so, as insurance premiums for Malibu homes versus that of a typical US home in another state, may cost the insurer twice as much. So the question is, why bother with home insurance?

Home insurance, quite simply, is insurance for the property. It covers loss or damage to a home and all items that may be found inside. The policy normally has a liability limit, that determines the amount of the insurance coverage. There is also what is termed as “deductible” or the out of pocket expenses coming from the insured. It is not to be mistaken for home warranty or mortgage insurance.

High-Value Home Insurance

Home Insurance or Homeowners Insurance is the basic protection when it comes to securing one’s home against perils, be it for damage or loss of the actual home, its contents, including personal liability for harm to persons. This means that the home is insured up to the extent of the selling price or just enough to cover the mortgage, which is in the event of damage and or theft. What aren’t covered are those resulting from natural disasters, like “Acts of God”, and “Acts of War”. Riders or extra policies may be purchased for these, though. Some have the wrong notion that securing home insurance is a luxury when in truth and in fact, it is really a necessity. Most lenders would require this from home loan borrowers to protect their investment. This also goes for landlords who ask for renter’s insurance, which is another form of home insurance. 

High-Value Home Insurance, on the other hand, is insurance coverage for homes with higher than normal values. It is comprehensive coverage for expensive homes, typically heritage houses, or those that come with special design elements and unique features. Actually, this form of insurance is not just a single product but an assortment of personalized service and offerings to meet the protection demands of these specialized homes, or in industry jargon “expanded coverage limits”. High-Value insurance protection may also be applied to condominiums and rental homes, as well. Sadly, it is estimated that 40% of high-value homes are underinsured or only have basic home insurance coverage. This means that apart from the actual structure of the house, customized work/renovation and specialty construction are not covered.

The three basic levels of coverage whether high value or otherwise include the following: First is Actual Cash Value, representing the total cost of the house and contents, less accumulated depreciation. Second, Replacement Cost, which is the same as actual cash value without deducting depreciation expense. This means that the rebuilding funds will at least be equal to the original cash outlays of the owner-insured. Lastly, is Guaranteed or Extended Replacement Value where claims may go higher than the original cost of the home to an extent not exceeding 20 to 25% higher. The claimant, in this case, may have the flexibility of reconstructing with better or improved specifications.

For the guaranteed replacement value or what others term as expanded coverage limits, there are added value services and benefits an owner-insured may not expect. For example, in partial loss scenarios, a standard coverage would only pay for the repair of the damaged portion, say of a kitchen damaged by fire. With expanded coverage, the insurance pays for the renovation of the entire kitchen. The same goes with valuable items that come in sets or pairs, the coverage provides for the replacement of everything and not just the damaged ones.

“Living expense” benefit is another extra feature. This is where the temporary living arrangements of the owner-insured, while renovation or rebuilding is ongoing, is paid for. There are also instances of cybertheft or stealing of digital property, the coverage also offers a level of protection against this. There is also “Cash Settlement” which provides for cold cash remuneration that gives the insured the flexibility to use the proceeds for any other purpose and not just for rebuilding.

Additional coverages may also include the following:

  • Sewer Backup for flood drains and sewerage systems that could be damaged during floods
  • Flood Coverage which is the more comprehensive version of the above and will cover all items that could be lost, destroyed, or damaged by flooding
  • Vacation Home Coverage which would also provide protection for a second home that will still form part of the original policy
  • Kidnap and Ransom coverage covers ransom for members of the family that might fall victim to kidnapping
  • Rebuilding to Code for rebuilding if in case a home needs to be reconfigured to conform to building and safety codes
  • Medical Coverage for pets are for animal lovers who will pay for veterinary bills and even temporary lodging 
  • Household Help Coverage for nannies and maids that could suffer injuries while on the job and includes medical expenses and even lost income
  • Excess and Umbrella Liability Coverage in the eventuality where the homeowner is sued and there are lawyers’ fees, fines, restitution that need to be reimbursed

How does a home qualify?

The basic qualification for High-Value Home Insurance, is, of course, the value of one’s home. It should be in the avenue not lesser than $750,000.00. Although some companies may consider a 300,000 home value as such. It should also carry a distinct characteristic making it stand out over typical homes, such as in the case of Heritage Houses. It is because the designs and the original materials used in these structures cannot simply be reproduced or bought at hardware stores at present. Another condition would be that the design elements are specially designed by an architect or interior designer specific to the home. Say, for example, a “green” home with environment-friendly materials and features such as solar-panel roofing that is linked to the centralized heating system. 

Structures apart from the main house will also be accounted for and included in the coverage. These include swimming pools, landscape, gazebos, outdoor living areas like a guest room, greenhouse, detached garages, and the like. Of course, high-value homes do not come empty and would usually come with expensive or unique contents such as but not limited to expensive or antique furniture, appliances, fixtures, paintings, rugs, jewelry, even a vintage wine collection. 

But safe to say, the most sure-fire way to determine whether or not one’s home qualifies, is of course talk with High-Value Home insurers. They will be more than glad to send highly qualified personnel that will provide on-the-spot evaluation, assessment, and value estimation of the home including the items found inside. This free service is referred to as “Risk consulting/home inspection” and covers onsite inspection while discussing with potential clients the appropriate level of coverage and the various ways to mitigate risks.

Lessons from the California WIldfires

The 2018 Woolsey Fire in the vicinity of Los Angeles and the Camp Fire In Butte County resulted in the demise of some 90 people, while around 20,000 structures spread across 250,000 acres were reduced to ash and soot. In monetary values, Cal Fire reports fire suppression costs of $432 million. Insurance claims have topped $12 billion coming from some 40,000 claims, more than a fourth were residential and most were a total loss. Pacific Gas and Electric Company or PG&E settled with wildfire victims for a whopping $13.5 billion.

To date, millions of American families opt to live in the wildland-urban interface where the urbanscape meets forests and grasslands. It is estimated that a third of US homes are in these scenic zones and make up an ideal home not too far from the comforts of the city but offers a calm, quiet surrounding free from all the noise. In California alone, 1.7 million houses out of the 3 million built in these areas have been declared highly prone to wildfires. The tendency is for home insurers to increase premiums attributed to a higher level of risk. Homeowners, instead of securing the right amount of insurance coverage, tend to just cut back, leaving their homes underinsured and worst, just skip out on securing protection altogether.

Many instances of disasters, not just wildfires, can be attributed to global warming and changing environmental conditions brought about by widespread urbanization and irresponsible citizenship. In short, calamities are inevitable and will just be a question of when and how severe. One’s home is more often than not, one’s greatest and most precious asset. It may not necessarily be in terms of monetary value, but one where memories are made and kept. It’s where family and friends converge and where one can seek refuge and solace in the face of everyday stress and challenges. You owe it to your family and to yourself to secure an asset that is a fruit of hard work and perseverance.