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Own a Luxury Home? Beware of Inadequate Insurance Coverage

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How much would it cost to replace everything in your home in the event of a total loss? You could catalog all your possessions, but that would probably be a bigger task than you’re prepared to undertake.

Many owners of high value homes face this dilemma when they seek personal property coverage; it’s one that has long vexed agents and carriers. Too often, according to ACE Private Risk Services, contents coverage is based on assumptions: either a rough guess by the homeowner or agent or a default percentage of the home’s structural value set by the insurance carrier.

As a result, homeowners frequently have significant gaps in coverage.

Last week, ACE sought to address this situation with the introduction of its Home Contents Valuation capability, which gives select policyholders customized estimates for determining their personal property coverage at policy inception.

The new service uses a propriety system and database developed by Asset Archives Inc. These capture the values of some 200,000 items totaling $1 billion and covering more than 2,000 categories, such as electronics, furniture apparel, sporting goods and equipment. The data were aggregated during the past decade of documenting and valuing the contents of luxury and custom-built homes.

How widespread is inadequate coverage of high value contents of luxury homes? The statement pointed to research findings by ACE and Asset Archives, showing that half the 400 homes for which they completed estimates over a four-month period had insufficient contents coverage.

The average level of underinsurance was nearly $600,000 for homes with structural values between $2 million and $7 million. Nearly 70% of homes whose contents coverage was less than 50% of structural value were underinsured for personal property.


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