Today’s high-value homeowners face an increasingly complex insurance market, requiring a review of their policies to ensure that limits and coverage terms and conditions align with their needs for adequate protection. Several factors are contributing to a “hard market,” including consistent billion-dollar weather-related losses year after year, higher claims costs due to regulatory changes, construction prices and social inflation.
The Impact of Severe Weather Losses on the Insurance Market and Policyholders
According to Chubb, between 2018 and 2024, events such as flooding, hurricanes, tornadoes and convective severe storms, as well as wildfires, resulted in hundreds of billions of dollars in insured losses. This increase in weather-related claims has triggered higher reinsurance costs, less capacity for new policies, tighter underwriting criteria, decreased competition resulting in higher premiums and changing carrier appetites for new business.
While we may assume that a challenging insurance market primarily impacts homes directly in the path of such disasters, the ripple effects extend far beyond those areas. Carriers are reevaluating where and how they offer coverage, not just in California or Florida, but across the country, including where we live in Washington, D.C., Maryland and Virginia. As a result, even properties in traditionally low-risk regions are experiencing changes to policy terms and conditions, as well as stricter underwriting requirements.
For example, underwriting losses, rising labor costs and evolving regulations are driving shifts throughout the insurance industry. Many insurers have begun requiring updated roofs, modern systems and smart technology such as water shut-off valves as conditions for coverage. Homeowners should meet with their insurance advisors to discuss these changes to ensure their properties meet the new standards set by carriers.
Rebuilding Costs and Delays Demand Higher Limits
Homeowners are also facing higher costs for new builds and reconstruction due to stringent building codes, skilled labor shortages and longer permit-to-completion timelines. Chubb reports that the average time to build a high-end home now exceeds 15 months, with rebuilding after a loss in some cases stretching over three years. Although construction materials have stabilized somewhat, factors such as eco-friendly code requirements and wage inflation have kept overall expenses high. It’s also expected that the California wildfires that destroyed about 10,000 homes in January will cause lumber prices to jump 25% to 40%, according to Chubb.
Given these conditions, reassessing dwelling limits and replacement cost valuations with an insurance advisor is critical.
Coverage Gaps in Personal Property and Collections
It’s not just the structure of the home that requires attention. Collections such as fine art, jewelry and other valuables must also be reviewed regularly. Homeowners should ensure scheduled property is up to date, with accurate valuations and documentation. Appraisals older than five to seven years may not meet carrier standards, particularly for high-value items. In some cases, insurers automatically apply inflation adjustments; however, this isn’t always sufficient, especially for appreciating assets.
Social Inflation Is Driving the Need for Higher Liability Limits
In a previous article, we discussed how social inflation – driven by an aggressive plaintiff bar, societal attitudes about compensation, third-party litigation funding and higher costs – are driving nuclear verdicts (over $10 million) and the need for personal umbrella insurance. When reassessing your high-value homeowners policy, it’s critical to look at not only your property coverage but also the liability insurance you have.
Proactive Steps: Risk Mitigation and Strategic Planning
To offset rising premiums, we recommend taking proactive measures to mitigate risk. Installing smart home technologies and safety systems can reduce risk and generate premium discounts. While some upgrades may not produce significant immediate savings, their role in preventing costly losses and maintaining insurability should not be underestimated.
Other strategic steps include increasing deductibles, which may be relatively low for policies written five or more years ago. Raising them to $5,000 or $10,000 can help manage costs while maintaining robust coverage.
The Bottom Line
Amid rising natural disasters and changing insurer appetites, it’s critical for high-value homeowners to review their insurance coverage. Engage with your insurance advisor to review reconstruction values, dwelling limits, personal property schedules and liability coverage. Ensure your home meets today’s underwriting requirements and consider preventative upgrades that can safeguard your assets.
Contact HWP Insurance to review your high-value homeowners insurance program.
About HWP Insurance
HWP Insurance is a leading insurance agency that offers customized solutions for successful individuals and families. With a strong presence in Washington, D.C., Annapolis and Southern Maryland, we offer guidance to protect what matters most. Learn more at hwphillips.com.
Enjoying this article?
