What Type of Insurance Covers a Luxury Home?

If you have a high-value home, you may want to purchase a specialized HO-5 homeowners insurance policy with high coverage limits, extra coverage types and open peril replacement cost coverage for your home and belongings to protect yourself from significant financial loss due to a damaging peril or liability claim.

Keep reading to learn more about high-value home insurance including how much it can cost and what coverage options may be available for luxury homeowners.

On This Page

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  What Is Considered a High-Value Home?

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  What Is High-Value Home Insurance?

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  How Does High-Value Home Insurance Work?

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  What Does High-Value Home Insurance Cover?

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  High-Value Home Insurance Add-Ons To Consider

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  How Much High-Value Home Coverage Do I Need?

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  How Much Does High-Value Home Insurance Cost?

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  How To Get High-Value Home Insurance

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  FAQs

What Is Considered a High-Value Home?

To qualify as a high-value property for homeowners insurance purposes, a home will typically need to be worth at least $750,000.^[1] However, this threshold can vary depending on your insurance company. For example, PURE Insurance only covers homes worth more than $1 million, while homeowners with ties to the military can only buy high-value coverage from USAA if their homes are worth at least $1.5 million.^[2][3]

What Is High-Value Home Insurance?

High-value homes are typically covered by an HO-5 insurance policy, which insures your home and belongings at their replacement cost value against any non-excluded peril.

A high-value home insurance policy will also likely come with higher coverage limits than a standard homeowners insurance policy and may include additional coverage types.

You can also buy coverage for a beach house or other vacation home. However, the fact that you don’t actively live in the home means it faces a higher risk of theft, vandalism and extensive damage due to a peril like a burst pipe. As a result, a second home will often be more expensive to insure than a comparable primary residence.^[4]

Keep in mind that you may need other types of coverage beyond home insurance to fully protect your property and assets. This could include sports car insurance, boat or yacht insurance and, if you employ any domestic workers such as a maid or nanny, workers’ compensation and employment practices liability insurance.

How Does High-Value Home Insurance Work?

High-value homeowners insurance typically provides replacement cost value (RCV) coverage for your home and belongings, meaning your insurance carrier will pay you whatever it costs to replace them up to your policy limits if they are destroyed by a covered peril. This differs from a standard HO-3 insurance policy, which may insure your belongings at their actual cash value (ACV), or their fair market value after considering depreciation factors like age or wear and tear.

Many homeowners insurance claims require a deductible, which is a set amount of money that you must pay out of pocket before your insurance company will contribute any money toward your claim. You may be able to select a higher-than-normal deductible for your high-value policy in order to lower the cost of your regular premium payments. For example, Travelers allows high-value homeowners to choose a deductible as high as $50,000.^[5]

In addition, some high-value policies allow you to waive your deductible after a substantial loss. For example, if you buy coverage from PURE Insurance and set your deductible lower than $25,000, then you won’t have to pay a deductible anytime you file a claim for more than $50,000.^[2]

What Does High-Value Home Insurance Cover?

Insurance for high-value homes generally includes dwelling insurance to cover the structure of your home and attached structures, other structures coverage to insure detached structures on your property and personal property insurance to cover your possessions.

While a standard home insurance policy only insures your personal property against the perils listed below, luxury home insurance should insure your home, belongings and other structures against any peril as long as the policy doesn’t list it as an exclusion.

Meanwhile, your policy should also include loss of use coverage to help you temporarily move after a covered loss leaves your home uninhabitable, personal liability coverage to pay for medical treatments, property repairs and legal fees if you are held responsible for someone else’s injury or property damage and medical payments coverage to take care of hospital bills if a guest on your property incurs a minor injury that you don’t want to escalate into a lawsuit.

What Isn’t Covered?

In general, homeowners insurance doesn’t cover gradual and preventable damage to your property caused by sources like wear and tear, neglect, mold or infestations. It also typically excludes coverage for losses caused by sudden perils such as the ones listed below.

Keep in mind that you may be able to account for some of these exclusions by purchasing extra coverage types such as flood insurance, earthquake insurance, sewer backup coverage and ordinance or law coverage.

Meanwhile, your insurance provider could exclude liability coverage for high-risk activities and dog bites caused by any breed with a reputation for being aggressive. In addition, your home insurance won’t cover intentional losses and will likely exclude coverage for losses related to a business you operate out of your home.

High-Value Home Insurance Add-Ons To Consider

Depending on the insurer you buy coverage from, the coverage types explained below may automatically be included in your high-value home insurance policy or may be available as endorsements to your policy.

• Extended replacement cost coverage: If you have extended replacement cost coverage, your insurance company will pay a certain amount over your dwelling coverage limit if necessary so you can rebuild your home. The extra amount is usually set at either 25% or 50% of your dwelling coverage limit.^[6]
• Guaranteed replacement cost coverage: With guaranteed replacement cost coverage, there is effectively no limit to your dwelling coverage as your insurer will pay whatever it costs to rebuild your home after a covered loss.
• Umbrella insurance: If there are multiple serious liability risks associated with your property, you can buy umbrella insurance to receive $1 million or more in excess liability coverage. Umbrella insurance can also apply to multiple types of liability policies at once, meaning it could provide extra coverage for both your home and auto policies if you ever exceed your liability coverage limits.
• Scheduled property coverage: While some homeowners policies set a sublimit on collectibles and other valuable items like art, firearms and jewelry, scheduled property coverage allows you to insure these items at their full value.
• Matching insurance: If a portion of your home is damaged by a covered peril, matching coverage can cover costs associated with obtaining matching materials so that the repaired parts of your home will look the same as the undamaged parts.
• Identity theft insurance: Identity theft insurance can cover expenses related to identity fraud such as paying to use a credit monitoring service.
• Cash settlement coverage: Some high-value home insurance companies will offer you a cash settlement that you can spend as you wish upon approving your claim.^[1] For example, if your house is destroyed by a fire, you could receive enough money from your insurance company to rebuild the house but instead buy a smaller house and then invest the remaining money into a business venture.
• Loss prevention coverage: A high-value home insurer may also help you pay for loss prevention measures such as installing a home security system or leak detection system.
• Kidnap, ransom and extortion coverage: Your insurance provider may offer coverage for ransoms and other expenses that arise if someone in your household is the victim of kidnapping or extortion.^[3]
• Accidental breakage coverage: Accidental breakage coverage provides broad protection for fragile items like sculptures, glassware, china and more. For example, Nationwide offers up to $50,000 to cover any sort of unintentional damage to your breakable belongings.^[7]
• Electronic data restoration coverage: Some high-value policies may also include coverage for any expenses associated with the loss and recovery of information you store digitally.

How Much High-Value Home Coverage Do I Need?

You should consider buying enough homeowners insurance to completely rebuild your home and replace all of your valuable belongings in the event of a total loss. As a result, it can be helpful to hire an appraiser to estimate the value of your home and create a home inventory that documents the value of your most important possessions before you set your dwelling and personal property coverage limits.

It’s generally recommended that homeowners buy between $300,000 and $500,000 worth of personal liability insurance.^[8] However, if you have a swimming pool or some other attractive nuisance that increases your liability risk, it may be worth purchasing even more coverage.

Usually, your homeowners policy will automatically include up to 20% of your dwelling coverage limit for loss of use claims and up to 10% for other structures claims, although you may be able to raise these limits depending on your insurance provider.^[8][9] You can also typically buy up to $5,000 in medical payments coverage.^[10]

How Much Does High-Value Home Insurance Cost?

In 2020, the average cost of an HO-5 policy for a home worth at least $500,000 was $2,853 per year.^[11] Prices can naturally be even higher depending on the coverage limits and deductible you choose, whether you add any other coverage types to your policy, where your home is located and how many homeowners insurance claims you have filed in the past.

How To Get High-Value Home Insurance

To find the most comprehensive policy for your property at the best price possible, you should obtain quotes from three to five different insurance companies. To get a quote, you’ll need to share information like the age of your home, the condition of its roof, your address and the number of people living in the home, which could be arduous if you reach out to each insurer separately.

However, you can simplify the process by going through an insurance marketplace like SmartFinancial. By filling out a single questionnaire, you can let us know about your coverage needs and budget and we can match you up with home insurance agents in your area. To get a free home insurance quote for a personalized policy, get started by typing in your zip code below.