If you saw the recent Good Morning America feature on the three-story, 3000 square foot closet located in a home in the Woodlands area of metro Houston, you may have also seen the follow-up story – the homeowner failed to set the home security system upon leaving the house and returned home to find the closet had been burglarized. Gone were about a $1 million in high-priced jewelry, watches, and designer handbags.
In an interesting twist, shortly after the burglary, the local Houston newspaper received an envelope of jewelry and other items from a person claiming to be responsible for the theft, along with a complaint from the disgruntled thief that the items were fakes.
Nonetheless, in the case of a theft of authentic valuables, one might ask, “Does homeowner’s insurance cover thefts of valuables in the home?” After all, many luxury homes are full of expensive items – most of which are portable and can walk off with a burglar or be subject to fire, water damage, or other threats.
Since we believe it’s useful for a luxury home expert to know the answer to this question, we decided to turn to an expert in specialized insurance for the very successful, Carrie Ousley of HUB Insurance.
Here are Carrie’s answers to our questions:
Q. Is there a difference in homeowner’s insurance for high-end homes as compared to insurance for average priced residences?
A. A big difference. When it comes to homeowners insurance, there are two categories of loss -- partial or total. Standard companies will repair or rebuild the home based on “like kind and quality.” The insurance companies which offer insurance for high net worth clients include “Guaranteed Replacement Cost” coverage in their policies. Even if it costs thousands more to rebuild the home, they will rebuild back to the original “custom” built features.
Q. So, for example, if a home has an antique Venetian crystal chandelier , the insurance company will seek out an antique Venetian chandelier instead of using a high quality new chandelier?
Q. How much more expensive is it?
A. It is actually less expensive, in many cases! Based on a luxury property priced at $1 million or more, the insurance cost is most always less than coverage from a standard insurance company. I’ve saved many clients anywhere from $1,000 to $8,000 annually on insurance coverage for homes over a million dollars in value. It’s a win-win. The client gets much broader coverage at a lower rate.
Q. Do all insurance companies offer special high-end overage?
A. No. Not all companies have special high end policies. In the U.S. there are five companies that specialize in insuring expensive homes. They don't work with homeowners directly, but homeowners can go through an independent insurance broker like myself. We gather the information and can provide quotes from multiple providers for a homeowner to compare and choose from. That’s a real time saver for busy successful people.
Q. Thinking about the Houston closet heist, what home contents are covered by insurance?
A. Personal belongings, such as clothes, purses, furniture, electronics, etc. are included as “Personal Property” and are covered in a homeowners policy. For instance, if one has a million dollar property, the personal property is usually covered at anywhere from 40% - 60% of the dwelling value ($400-$600K). However, if there is a deductible of 1% for “All Other Perils;” then a $10,000 deductible would apply. However, there is limited coverage for jewelry on a standard homeowner’s policy. Jewelry theft coverage of $5,000 would not be uncommon; however, the $10K deductible applies. We always suggest our clients schedule their jewelry. There is a charge for scheduling jewelry, but there are many benefits to doing this. And, there is no deductible, if there is a Jewelry loss. A nice feature that the high net worth companies are doing is offering to “blanket” jewelry and fine arts coverage. This is nice because the clients no longer have to give us full descriptions of all of the items and/or provide appraisals. Only if an individual item is valued at $50K do these companies require appraisals. And, I recommend my clients get their items appraised every 3-5 years, so that they know what the current value is.
Q. What is an umbrella policy?
A. An Umbrella policy is an extra layer of liability coverage that “sits over” one’s homeowners and automobile primary liability policies. It will also “sit over” any other properties, such as vacation homes, rental properties, vacant properties and acreage as well as over watercraft, ATVs, etc. It is a much needed policy for everyone to have and especially those who have a significant amount of assets and risk.
The average cost of a one million dollar umbrella liability policy for a client with one home & two autos is about $500. We always say that you don’t have to be a millionaire to be sued like one.
A nice feature with most umbrella liability coverage is that legal defense costs are also included over and above the limit of liability coverage a client chooses.
Q. How could a homeowner get a quote for specialized luxury insurance to compare to a current policy?
A. It’s simple. A homeowner should provide the independent agent with copies of their current policies so that quotes will be apple- to-apples and then we have to send out one e-mail with a few additional questions. Once we receive this final information, we approach our companies for quotes. We include a side by side comparison for our clients. We include a summary reflecting their current coverage compared to our quotes (coverage and pricing) from multiple carriers.
Q. Why should a Realtor be knowledgeable about the differences between luxury home coverage and regular homeowners’ insurance?
A. The differences are in the coverage, the service, the specialty products and claims experience. We buy insurance with the hopes that we will never need it, but if we do, you WILL notice the difference. For instance, our affluent Chubb clients have very expensive vehicles. A bumper could cost $20,000 or more. Have a talk with a high end auto dealer, as I have, and they say that Chubb just writes the check. I’ve seen this with my clients’ claims.
If I were a Realtor I would like to think that my client is getting the type of high-end coverage for his upscale property that he deserves. Specialty high-end coverage is much broader, one of the many coverage differences is the “Guaranteed Replacement Cost Coverage.” A client can also add special coverage for domestic employees, add kidnap & ransom coverage if they are worldwide travelers, and have an exceptional claims experience -- all of this at a lower premium cost than non-high end coverage. Why would a real estate professional not want his or her clients to experience this?
Q. Final thoughts on high end insurance?
A. So many of my clients have been with a standard insurance company since college and have never ventured out to even see what else is out there for them. They move from their first $300,000 home up to a $800,000 and then up and up and now they are in a $2,000,000 property and they have no idea that there is a much better insurance option in the market. A real estate professional who points them to high-end insurance can be a hero. I don’t know the insurance situation around the Houston closet heist, but I hope the homeowner had high-end insurance coverage with a schedule for jewelry.