You are excited. You’ve are now living in your dream home, enjoying the luxury you worked so hard for. Everything is perfect: the view, the company, and the deal you got on the home and your insurance premium.
One issue that luxury homeowners encounter is higher premiums. A luxury home can increase the cost of insurance for a number of reasons. Consider the issues that can increase or decrease the cost of insurance for your luxury home.
Location
The location of the house has a lot to do with the price of insurance. While most luxury homes are in good neighborhoods, location has to do with more than just the crime rate. If there have been a number of claims on other homes in the neighborhood, it can affect the cost of your premium, even if you have a perfect record.
Roof/Plumbing/Electrical Updates
Luxury homes are often well maintained, but never assume that everything is up to code. Old roofing, plumbing, and electrical can increase the cost of insurance. Some companies will even insist on getting updates before they will continue coverage on the property. When shopping for a luxury home, make sure to find out when the last time was that these three elements were updated. You might be surprised by what you learn.
Distance from Fire Department
Most luxury homes are on expansive pieces or property, distanced from neighbors and the community. This also means that the home can be far away from a fire department. If the property is more than five miles from the nearest fire department, the rates on insurance will go up. Find out how far you are before investing in the property.
Age of Home
Luxury homes come in all ages, from brand new to centuries old. The age of a home can affect the premium for insurance. Many older homes haven’t had updates to electrical or plumbing, and they run a higher risk of having serious problems such as mold or cracks in the foundation. These can ruin the value of a home and cost quite a bit to fix. The newer the home, the lower your premium is likely to be.
Pool
Having that pool on your property could make or break the deal for purchasing the home, but you should also keep in mind that pools tend to increase the premium for insurance. Liability and flooding issues are a real problem with pools. Find out how the rate compares and decide if it’s worth the extra premium.
All of these things can increase or decrease the premium for insurance. Luxury homes are expensive enough to insure. Be smart about what you are buying so that you can get a good deal on premiums from companies such as Mills Insurance Services, which specializes in luxury homes. Companies like this can often offer better rates because they have fewer high-risk insureds.
When shopping for the best rates, consider the risks that are no always included in the premium and determine if you think your luxury home will need the extra coverage:
- Loss of Use – If the home is damages to the point that you can’t live there, loss of use insurance kicks in. Not all policies cover this, so find out if yours does. The extra cost may be worth it if disaster strikes.
- Termites – More often than not, this is not covered by a standard insurance policy. If you live in a southern climate where the temperature is fairly moderate year-round, such as California, you will want to keep your home insured against this pest.
- Flood Coverage – Very few standard policies cover this. If your home is anywhere near a flood-risk, investing in the coverage is more than worthwhile.
- Replacement Cost – If your belongings are damaged, replacement cost covers them. However, what most people forget is that it covers current market value. So your 4-year-old computer could only be replaced for $200; not nearly enough to replace it. Consider investing a little extra for expensive items around the house that aren’t so easy to replace.
- Natural Disasters – Tornadoes, hurricanes, and earthquakes are often not covered by standard policies. If you invest in a luxury home in an area that is susceptible to any of these natural disasters, you may want to spend a little more to protect your investment.
Luxury homes are an investment in money that deserves to be protected. Be smart about the level of protection you choose, based on your needs. Look before you leap
