Property and Casualty Insurance: Protect Your Property, Preserve Your Wealth

When disaster strikes — whether it's an accident, burglary, fire, storm or lawsuit — having the right property and casualty insurance can be the difference between a quick recovery and a financial catastrophe. Do you have the coverage you need to help protect both your property and your overall financial well-being?

The Basics

Property and casualty insurance includes coverage for physical property, like your home, vehicles and other possessions. It also provides liability protection if someone is injured on your property or you're found legally responsible for damages.

Standard homeowners insurance typically covers a wide range of areas:

• The structure of your home,
• Personal property (with limits),
• Liability for injuries or damages to others, and
• Additional living expenses if your home is temporarily uninhabitable

Homeowners policies generally protect against risks, such as theft, fire and storms. However, certain natural disasters can require separate policies.

4 Coverage Factors

Homeowners, auto and liability policies aren't one-size-fits-all. As you evaluate your insurance coverage, consider these four essential factors:

1. Actual cash value vs. replacement cost. An actual cash value policy reimburses you based on the depreciated value of the damaged property, often leaving you with out-of-pocket costs. A replacement cost policy, on the other hand, covers the full cost of replacing the damaged item with a new one. For even greater protection, extended replacement cost coverage can be added to a homeowners policy to provide additional funds if construction costs surge after a disaster, which is common.

2. Deductibles and premiums. Your deductible — the amount you must pay out of pocket before your insurance kicks in — directly impacts your premium. Raising your deductible can significantly reduce your premium. But you must be sure you can comfortably cover the deductible in an emergency. Some homeowners policies include percentage-based deductibles for disasters like hurricanes that can be far higher than flat-rate amounts.

3. Liability limits. Basic homeowners and auto policies have liability limits, which may not be enough to protect you in today's litigious climate — especially if your net worth is high. You may need to purchase additional liability coverage to have sufficient protection.

4. Policy exclusions. Every insurance policy has exclusions for specific events or types of damages. Common homeowners insurance exclusions include:

• Floods,
• Earthquakes,
• Mold,
• Sewer backups, and
• Damages from neglect or wear and tear.

Review your policy's exclusions carefully. If you live in a region with elevated risk, you may need to purchase separate policies or endorsements to fill the gaps.

Add-Ons and Supplemental Coverage

If a standard policy leaves gaps in your protection, add-ons and supplemental coverage can help fill them. For example, an umbrella policy provides an additional layer of liability protection, typically starting at $1 million and scaling up as needed.

When it comes to natural disasters, flooding is the most common type in the United States, and it's excluded from most homeowners policies, regardless of location. The National Flood Insurance Program (NFIP) offers flood insurance coverage through the Federal Emergency Management Agency and private insurers — even for homes outside high-risk zones.

Homeowners insurance typically does include coverage for other types of storm damage. But, in hurricane-prone states, homeowners may face high-wind deductibles or need separate policies. Similarly, homeowners in wildfire-prone areas are finding that coverage is becoming more expensive — and, in some cases, difficult to get at all.

Here are some strategies to consider if you're having trouble obtaining affordable, comprehensive coverage in a high-risk zone:

• Bundle policies for better rates and coordinated coverage.
• Invest in risk-reduction measures, such as fire-resistant materials or storm shutters.
• Consider government-backed or last-resort insurers, like state Fair Access to Insurance Requirements (FAIR) plans. (See "State-Sponsored Insurance of Last Resort Plans" below.)
• Consult specialized brokers who understand your market and have access to niche carriers.

Taking a proactive stance can help you maintain coverage, avoid excessive premiums, and more effectively protect your home and assets.

Special Considerations for High-Net-Worth Individuals

The stakes are considerably higher for high-net-worth individuals. Wealthier households face increased exposure to liability and usually have more complex property holdings, which may include valuable personal property.

For example, standard homeowners policies often fall short for luxury properties. High-value home insurance may be necessary to provide adequate protection. It can offer:

• Higher policy limits,
• Coverage for rare materials and architectural details,
• Guaranteed or extended replacement cost options, and
• Enhanced benefits for temporary housing, landscaping and personal liability.

Similarly, specialized protection for high-value possessions is essential. Here's a breakdown of common categories that require enhanced coverage:

• ‍Jewelry, art and collectibles. Most standard policies cap these at low amounts. Endorsements and personal articles floaters help ensure full-value protection.‍
• Boats and watercraft. Larger or motorized vessels often require marine insurance that includes hull damage, towing and liability.‍
• Luxury and collector automobiles. Classic or exotic car insurance provides agreed-value coverage, flexible mileage plans and custom claims handling.

Make Sure Your Coverage Evolves with You

Insurance isn't a "set it and forget it" tool. As your life evolves, so should your property and casualty insurance. Otherwise, you might find yourself with inadequate coverage. Events that should prompt a review include:

• Major home improvements or increased property values,
• Purchases of high-value assets or luxury items,
• Relocation to or out of a high-risk region, and
• Retirement.

A periodic insurance review with your financial, legal and insurance advisors will help ensure your coverage remains aligned with your needs, goals and risk exposure.

Coverage That Fits

Whether you're protecting a modest home and a few family vehicles or a multimillion-dollar estate with fine art and antiques plus several luxury vehicles, peace of mind doesn't come from simply having property and casualty insurance. It comes from having the right coverage to meet your needs. Your financial, legal and insurance advisors can help you obtain insurance coverage that fits your current assets, lifestyle and goals.

State-Sponsored Insurance of Last Resort Plans

About half of the 50 states offer programs to ensure that homeowners in high-risk areas have access to essential insurance coverage. Here's a list of state programs with links to their websites:

1. Alabama Insurance Underwriting Association
2. California FAIR Plan Association
3. Connecticut FAIR Plan
4. Insurance Placement Facility of Delaware
5. Florida Citizens Property Insurance Corporation
6. Georgia Underwriting Association
7. Hawaii Property Insurance Association
8. Illinois FAIR Plan Association
9. Indiana Basic Property Insurance Underwriting Association
10. Kentucky FAIR Plan and Reinsurance Association
11. Louisiana Citizens Property Insurance Corporation
12. Massachusetts Property Insurance Underwriting Association
13. Michigan Basic Property Insurance Association
14. Mississippi Windstorm Underwriting Association
15. New Jersey Insurance Underwriting Association
16. New York Property Insurance Underwriting Association
17. Ohio FAIR Plan Underwriting Association
18. Oregon FAIR Plan Association
19. Insurance Placement Facility of Pennsylvania
20. Rhode Island Joint Reinsurance Association
21. South Carolina Wind & Hail Association
22. Texas FAIR Plan Association
23. Texas Windstorm Insurance Association
24. Virginia Property Insurance Association
25. West Virginia Essential Property Insurance Association
26. Wisconsin Insurance Plan

These websites provide more information about the specific coverage and eligibility requirements.