Your home insurance policy should protect the investment you’ve worked so hard for. But when you build a custom or luxury home with unique design elements, your insurance needs will differ from other policies. A standard insurance policy could leave you paying out of pocket to rebuild.
Let’s take a look at the basics of fire insurance coverage, what will be covered under standard policies, and what problems you might run into if your home features custom design elements.
1. Structure
In a fire claim, Structure coverage is usually the largest portion of your policy. The insurance company should pay to repair or rebuild your home in the wake of a fire.
When it comes to customized elements, there are some problems you should anticipate. First, the insurance company usually wants to work with a preferred contractor. They will put out a tender to bid on the contract and will want to work with the contractor who offered the lowest estimate.
That doesn’t always fit the goals of homeowners with high-end preferences. You may need to negotiate a cash-out with the insurance company and pay the difference yourself.
Does Fire Insurance Cover Custom Design?
If you’ve worked with an architect or an interior designer to create a unique home, you could run into problems with your insurer should anything happen. The problem you are likely to run into is policy limits.
Unless you have a policy that takes the unique features of your home into account, your policy limits won’t give you the room you need to work with an architect or designer on the reconstruction of your home.
High-end or specialized building materials can also quickly surpass your coverage limits. Make sure the structure portion of your policy is high enough to cover features like these.
2. Contents
Your fire insurance policy also covers the contents lost inside the home, including things like:
- Home media
- Computers and electronics
- Furniture
- Clothing, linens, etc.
Contents insurance often has individual limits for certain types of belongings. You may need to take out home insurance content endorsements to increase your coverage for valuables like jewellery, high-end bicycles, cash, original works of art, spare auto parts, or high-end furniture.
After a fire, some homeowners would rather update their personal belongings than replace the things that they’ve lost. In others cases, the belongings they’ve lost are irreplaceable. Usually, the insurer requires you to replace the lost belonging, but in some cases, you may be able to negotiate a lump sum payout and replace your belongings as you wish.
3. Additional Living Expenses
ALE coverage pays for the additional expenses you take on when your home is uninhabitable. If you have to stay at a hotel or rent an apartment while the damage is repaired, Additional Living Expenses coverage is used to cover the bill. It can also be used to pay for extra costs such as transportation, storage, moving, and additional food costs.
Fire insurance coverage can do a lot to mitigate the financial impact of a house fire, but when you’re dealing with custom and high-end properties, you may run into disagreements with the insurer or insufficient coverage limits.