A trend is developing in the high valued homeowners insurance market that may be a good option for insurance consumers and save agents headaches at the same time. Many times, clients do not wish to insure their homes for the full “replacement cost” of what it would cost to rebuild it in the event of a total loss.
For instance, a customer with a home that has a value of 10 million dollars (replacement) might come to the conclusion that they only want to insure it for 6 or 7 million- with their logic being that they would “never build it back the same way again” if they had to do so in a total oss occurred. By “capping” their coverage and limiting it to a specific amount they are in a sense self insuring their risk – the difference being the true replacement cost of the home minus their capped amount that they choose. The headache saving process for agent lies in the fact that generally insurance carriers demand that homes be insured for 100% of their replacement value. When a customer does not want to do this then options can be limited if the agent does not know where to turn.
Premiums can be drastically reduced using this “capped” method but another option that is available is to focus on selecting a larger than normal deductible on the risk. Typically, most insurance companies in the high home value market offer deductibles that stop at $50,000 per incident. Under specialty programs that are currently offered by several of our carriers, deductibles can reach 1 million dollars. These policies are not common in the marketplace and are only offered in company’s excess and surplus lines markets – which we at FPR have access to.
If you are in the market for purchasing a homeowners policy for a residence in the multi million dollar range and this type of approach intrigues you, contact us at FPR and we can get you a quotation through one of our carriers specializing in these types of risks – it does not matter where you live. Currently two of our carriers, Fireman’s Fund and ACE, offer variations of this type of insurance that could be a fit for your needs.