While most home insurance companies do a great job of insuring the average homeowner, those making a substantially higher annual income need an affluent homeowners insurance PA policy. The reason for this is that the coverages differ in terms of the amount of protection offered.
Furthermore, how you structure your custom insurance policy will have a big impact on the amount you pay in home insurance. Here are some examples of where the affluent can customize their insurance policies in order to ensure every dollar they spend goes towards coverage they actually need.
Coverage for other structures
A standard home insurance policy has 10% coverage for other structures on property separate from the home (i.e. fences, storage sheds, detached garages). For example, say a home is insured for $1.5 million, other structures coverage would be $150,000. For some affluent homeowners who may have a pool house, detached garage, tennis court, or a guest home, $150,000 is probably inadequate.
For those who don’t have a detached garage or even a fence, they would be paying for coverage they don’t need. The important point here is, 10% coverage may be fine for a non-custom home but for affluent homeowners it should be adjusted to fit the insured’s needs.
Personal property insurance
A standard insurance policy has 50% coverage for personal property, which covers the contents of the home (electronics, clothes, furniture, appliances, etc.). For affluent homeowners this amount may be way too much or too little.
For example, your home is insured for $1,500,000, giving you $750,000 in contents coverage on a standard insurance policy. Your previous home was insured for $800,000, which gave you $400,000 in contents coverage. Overnight you have almost doubled your contents coverage going from $400,000 to $750,000, although you own the same contents (homeowners who are downsizing have the opposite happen and end up being under-insured).
Again, the point is this coverage must be discussed with someone who understands your present needs. A flat amount may work fine for the majority of homeowners but it doesn’t always work for those with a custom lifestyle.
Another area where you, as an affluent homeowner, can customize your policy is through deductibles. Ironically, many high net worth individuals carry deductibles of $250, $500, or even $1,000. Yet, when a small claim does occur they don’t file because they don’t want any claims impacting their renewal premium. Like most policies, the affluent homeowners insurance is primarily there for catastrophic events. If you can afford to self insure a risk, then do it, and if you have the means to raise your deductibles do so, as the premiums savings can be substantial over time.