64% of homes are underinsured, according to a 2014 report by Marshall & Swift, a company that tracks rebuilding costs for insurers. This means that the majority of homeowners will pay one way or another if their home is damaged or destroyed.
This could be true even if you have paid extra to include replacement cost value as a feature of your policy. Seems counterintuitive, doesn’t it? Shouldn’t replacement cost cover the cost of replacement? Not necessarily.

How Underinsuring Happens Let’s say your high-end home is destroyed in a fire. Most policies with replacement cost also come with a dollar limit, which generally maxes out at 25-50% more than the amount for which your home is insured. This could be a problem for a few reasons:

  • Your initial home valuation may have been set too low.Many mass-market insurance agents don’t have the skills to accurately assess the cost of custom finishes. In an effort to sell more policies, they often lower the home valuation in order to keep the premium low. An estimate based on averages won’t work for more costly homes.
  • Prices may have risen. Labor and material costs change. Take those Brazilian hardwood floors. Say a beetle species wiped out several large groves, making the wood a hot commodity. Construction prices also tend to surge during a natural disaster, if homes in your area are damaged. So, if your policy limits you to 20% over the initial coverage amount, that’s the maximum that you’ll get, even if the flooring cost has increased 30%.
  • You may need to modernize. Especially if you have an older home, you may incur additional costs on a rebuild to bring systems like plumbing or electrical up to code.

You Have Options The good news is that the right home insurance is available. A number of insurers work specifically with the high-end market, and they have several advantages:

  • They know how to value custom homes. Staff understands that the cost of your Italian marble isn’t the only consideration. You should also be insured for the cost of the skilled laborers needed to install it properly.
  • They offer extended replacement cost coverage. They will guarantee to rebuild your home as it was, period. Required upgrades to meet modern building codes will be covered.
  • They know the risks. These companies only insure the high-end market. They understand what types of claims are likely to arise and how much they will cost, which enables them to price their products competitively.

For those with custom finishes and unique features in their homes, it is important to have expert insurance advice. We would be pleased to evaluate the scope of your needs, both in terms of breadth of coverage and your coverage limits. And we can provide quotes from all of the top-tier insurers in the nation.

Please contact us at 509.381.7900. We’ll fit into your schedule and make the process as simple and seamless as possible