Homeowners Insurance for High-Value Homes: How Much Coverage Do You Really Need?

When you own a home, insurance is a critical consideration. Having adequate insurance protects you from the financial strain of rebuilding or repairing your home and replacing your possessions after a major disaster. Having seen several homes lost in a fire just up the block, I’m acutely aware of how important a homeowner’s insurance policy can be.

If you own a high-value home, finding the right insurance policy may not be straightforward. Here’s a closer look at homeowners insurance for high-value homes to help you understand the nuances of finding the right policy and limits for your needs.

Homeowners Insurance for High-Value Homes 101

High-value homes are common among medical professionals. After all, that’s a major perk of the typical high income after spending decades (and often six figures) on a medical education. But after buying that home, getting enough insurance is imperative.

In the event of a major weather event, fire, earthquake, flood, or other unforeseen disaster, homeowner’s insurance can provide for repairs or replacement of the home and its contents, plus other costs like having a place to live while your home recovery takes place.

While we hope it will never happen, around 5.5%-6.5% of homeowners file a claim each year. Depending on your location—like Florida for hurricanes or California for earthquakes and fires—you may be more or less likely to file a claim. But in any case, having enough coverage to replace your home and its contents is a no-brainer for most homeowners, including high-paid medical professionals.

What If You Don’t Have Enough Insurance for a High-Value Home?

Let’s consider a hypothetical situation. Assume Dr. Pat bought a home for $2.5 million. Pat has a homeowner’s policy offering $2.5 million in coverage with a $10,000 deductible. After a devastating fire, the insurance company deems the house a total loss. Pat thinks that after a $10,000 deductible, the insurer will take care of the rest.

But Pat is in for a rude awakening. Due to inflation and market conditions, the cost of replacing the house is now $3 million, leaving Pat with a $500,000 deficit to rebuild a home similar to the original. If Pat doesn’t have enough savings to make up for the shortfall, it might be necessary to get a new loan, sell investments, rebuild a smaller or lower-end home, or find a new place to live. None of those options are ideal.

Remember, your insurance company is out to make money, not necessarily to ensure you have the best policy for your needs. It’s ultimately your responsibility to know how much it would cost to replace your home and its contents and make sure you have enough coverage.

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Key Features of High-Value Homeowners Insurance

If you own a high-value home and need a high-value homeowners insurance policy, look for these key features:

High Coverage Limits

While you’ll pay more to insure a high-value home, having enough funds available to replace your entire home and contents is why homeowners insurance exists. Shopping around for the best combination of costs and coverage can lead to significant savings while ensuring you can rest easy knowing you’re financially protected from damage to your property.

Full Replacement Cost Coverage

Insurers or insurance agents may suggest a lower coverage limit to help you get a lower premium, but that’s probably not the best choice for a high-value home. You can get full replacement cost coverage or a specific cash value of coverage. In either case, you’ll want to ensure your full replacement cost is covered.

Additional Living Expenses

If your home is severely damaged or destroyed, you’ll need a place to live while it’s repaired or rebuilt. Additional living expenses coverage helps pay for temporary housing—such as an apartment or rental house—while you’re waiting to move back in.

Riders and Coverage for Unique and Custom Features

If your home has unique or custom features, you may want to add additional cash coverage or get specific coverage to replace those features. This can be particularly important for historic homes and luxury properties with custom finishes. You can also add riders, which are add-ons to your policy, for specific items like jewelry and artwork.

Personal Liability Protection

Liability coverage protects you from financial losses if someone else is injured on your property. If a visitor slips on the ice or trips on your stairs, liability coverage can pay for a lawsuit up to limits.

Don’t Forget Umbrella Coverage

Umbrella insurance offers additional liability protection on top of your homeowners and auto insurance liability limits. For doctors, having umbrella coverage is often a wise decision.

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Common Risks High-Value Homeowners Face

We’ve already discussed a few examples where insurance could kick in and help.

Natural Disasters and Extreme Weather

• Wildfires threatening homes in areas with high vegetation
• Flooding from heavy rains or overflowing rivers
• Earthquake damage in seismically active regions
• Hurricanes and tornadoes causing structural damage
• Ice storms leading to roof collapses or water damage from frozen pipes

Floods and earthquakes are not typically included in a standard homeowners insurance policy. You’ll need to add additional coverage for those separately.

Theft and Vandalism

• Break-ins targeting luxury items such as jewelry or electronics
• High-profile homes being vandalized during social unrest
• Art and antique thefts from poorly secured private collections
• Cyber-related home intrusions like smart home system hacks
• Outdoor theft, such as stealing high-value landscaping features or vehicles

Riders and higher policy limits can ensure you are compensated in case of these and other covered events.

How to Choose the Best High-Value Home Insurance Policy

While you’re a medical expert, you may not be an insurance expert. Following these steps can help you get the right coverage:

Consider Working with an Independent Insurance Agent

You can do research online, but an independent insurance agent is a specialist who can shop around and compare policies for you, saving you time and potentially money.

Get Professional Appraisals

Appraisals for your home and valuables help you purchase insurance with high enough limits, and they can be useful in the event of a claim.

Review Policy Exclusions and Add-Ons

Exclusions for losses due to earthquakes and floods are standard, and you’ll likely find certain collectibles are also left out from coverage. Closely read exclusions and discuss potential add-ons with your agent or insurer to get enough coverage for your needs.

Don’t Leave Your Financial Future to Chance

It can be tough to pay so much for something you hope you’ll never use. However, for most high-value homes, having enough insurance for the full replacement of the home and everything inside is essential. Unless you have the cash and desire to self-insure, going without enough insurance for a high-value home is simply too risky—even for high-income professionals.

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The White Coat Investor may receive compensation from White Coat Insurance Services, LLC; licensed in all states including MA and DC; CA license #6009217; NY license #1758759 (exp. 6/2025); Registered address: 10610 S. Jordan Gateway, #200 South Jordan, UT 84095. This does not affect the cost or coverage of insurance.