As the economy improves and new homes are being built, insurance professionals have begun to see the cost to rebuild homes increasing over time as well.
The upward trend means more and more independent agents are being asked to service high-value homeowners accounts – typically defined as those having a replacement cost at the $1 million mark or higher.
While acquiring these types of accounts is good for business, however, Meghan Melendez – personal lines account manager for Abram Interstate Insurance Services – says “we know our agents are great at providing information they know is needed to rate high value but the difficult part is expecting the unexpected that can come with high-value homes.”
It is likely that the same characteristics that contribute to the home being more than a million in replacement cost also make the home ineligible for some markets.
Carriers that insure multimillion dollar homes really need and want to know what they are taking on as a potential exposure and many factors are involved in the consideration of such business. A home with rare imported materials, an outbuilding that houses exotic animals, or a home with a high profile occupant not only require more in depth assessment of the replacement cost but may also need additional time for rating to ensure that the proper endorsements are applied or to secure reinsurance.
The amount of detail that goes into a high value replacement cost estimator not only yields a more accurate coverage limit but can also open the door to more questions about the risk itself.
Melendez says, “I have worked with agents that tell me when they are able to do a full walkthrough or use online tools to view the full property; they obviously have a much better idea of the replacement cost, but also of the level of exposure they are about to write.”
While visiting or viewing the property, they may see an extensive memorabilia collection, an Ocelot or a full-scale sound studio that could prevent them from writing with particular markets so they are able to expedite their quote process by avoiding such markets and targeting those that have an appetitive for the unusual.
While considering all of these factors it is important to dig into the past as well. When homes of this caliber experience a loss, a payout in excess of $100,000 could occur since a simple water line leak in the refrigerator could cause significant loss to imported hand scraped wood flooring. It can be a much different situation than a water loss in a standard dwelling, which may only cost $2,000-$5,000 to repair.
A loss of $100,000 could cause some insurers to second-guess writing a property, but when dealing with a high value home, a loss of this size might only warrant an increased water deductible or creative underwriting to mitigate against possible future loss.
While there is more involved with insuring these high values risks, Melendez is clear that it’s still an attainable market for insurance agents to cover, and to do so well.
For Melendez, writing high value homes can be one of the most rewarding challenges. “I love being able to take a hard-to-place home that an agent thinks may be uninsurable and figuring out a way to write it and keep it on the books.”
