Home Insurance Policies: The More the Merrier for Some

27 Feb


Home Insurance Coverage

Many homeowners are compelled to choose more than one home insurance policy.

Yes, it is true. Whatever be the cost of the premiums or the state of affairs in the economy, many homeowners are compelled to choose more than one home insurance policy. After all, their homes are their most valuable assets. So are their precious art, wine, or book collections; or to be more realistic and practical, their tools, kitchenware, and/or furniture. And it takes just one instance of Mother Nature’s fury (or a costly lawsuit) to wreak havoc on their years of toil and the mounds of dreams and/or hopes built around these.

More than One

Many people who own properties worth $1 million or more tend to select multiple home insurance policies. They need more than just a basic home insurance policy to cover damages caused by natural disasters like floods, insure their valuable collections, and also protect their assets from liquidation in case they face a lawsuit from a workers’ compensation claim filed by one of their clients or employees. The demand for multiple home insurance policies is on the rise notwithstanding the increase in the premium amounts, by as much as 5 percent in the last two years.

So what are the usual rules of the game in the home insurance market?

One Reason

The most obvious rule is that the more expensive a house or the rarer it is, the more the premium that the homeowner has to dish out for it. For instance, rare installations and art objects in a house when damaged, can only be repaired by highly-skilled service men. Their services are not only costly but also complicated. So, naturally the claims of homeowners with such homes run into substantial amounts and as a result, they have to pay higher premiums.


There are also other determinants to this equation. The insurance premiums for luxury homes vary depending on their locations and the frequency of occurrence of natural disasters in these areas. For instance, luxury homeowners in hurricane-prone areas may have to distribute out as much as $50,000 a year as a premium to obtain a policy that covers wind damage, over and above their basic home insurance coverage. That is, if the homeowners can secure a policy. Sometimes insurance companies are known to refuse to provide coverage to homes located in certain weather-wise vulnerable areas like Palm Beach (Florida) and Hilton Head Island (South Carolina). And even if some insurers do, they first make the applicant install hurricane-resistant features and fixtures before selling a policy.

On the other hand, luxury homeowners with properties worth $1 million or more in areas where natural disasters are rare, have to pay anything between $4,000 and $5,000 a year as premium and also spend about $25,000 as a deductible.

Sometimes, homeowners have no choice but to opt for multiple insurance policies in order to secure a mortgage. For instance, lenders insist that homeowners with properties in flood-, earthquake, and/or hurricane-prone areas first acquire coverage for damages that may be caused by these natural occurrences before they approve their mortgages.

A Balancing Act

Bundling policies with a single insurance company is usually advantageous for homeowners. Insurers tend to offer lucrative discounts on premiums for multiple policy holders. Insurance companies also have fewer reservations about insuring a house in a “risky” zone if the applicant has another property in a less-risky location insured by them.

Preparing for the Future

Thus, there are ample reasons why homeowners are compelled to choose multiple insurance policies. While some of these are initiated by the insurers themselves, the homeowners too, are able to soak up some distinct benefits from having their valuable assets secured via multiple fronts and insurance packages.

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