In 1752, Benjamin Franklin established the first property insurance company in America.1 His Philadelphia Contributionship for the Insurance of Houses from Loss of Fire, as the name suggests, only covered the cost of rebuilding homes destroyed by fire. Damage from other causes and/or replacement of contents remained the responsibility of the homeowner.

Over the years, the insurance industry has evolved to offer a broader range of coverage for homes, valuables, conveyances, liabilities and risks that Benjamin Franklin could hardly have envisioned. As these policies grew more robust, it became safe to assume that your insurance would cover the replacement of your home and everything in it, minus deductibles.

However, that assumption no longer holds, particularly for owners of high-value properties in areas prone to wildfire and catastrophic weather events. Increasing losses have led to sharp premium increases, and even those willing to pay far more are struggling to find insurers willing to take their business. The result: Homeowners policies are shifting from a “one-policy-covers-all” approach to “a la carte” model of coverage.

Data driving homeowners policy decisions

While it’s unlikely that the U.S. insurance industry will regress to 18th century practices, the industry’s current focus on requiring homeowners to implement risk mitigation strategies and acquire more risk themselves may well become the norm. The challenge for affluent homeowners will be to determine the optimal balance of exposure mitigation and self-insurance they’re willing to absorb should losses occur.

Finding the right mix requires a series of decisions based on the probabilities of different types of losses in your location, the expense and time required to implement mitigation measures, the loss costs of your home’s contents and the risk factors of your lifestyle. In addition, the terms of your mortgage and requirements of your co-op or neighborhood association may also require you to maintain certain types and levels of coverage.

Factors that homeowners should consider before choosing a policy include:

  • Regional considerations. The primary threats for major damage to homes varies greatly by region. Florida, for example, ranks No. 1 in total insured losses for hurricane wind and storm surge damage; the Sunshine State also has $4 trillion in insured properties exposed to hurricane risk.2 Californians, meanwhile, face the greatest risk from wildfires.3 Floridians may find that raising limits and reducing deductibles for flood insurance and taking on much more risk in the homeowners policy may be the optimal approach. Californians may want to consider dropping wind coverage and procuring parametric wildfire coverage.
  • Local considerations. Of course, the threats that matter most are those that hit closest to home. Assessing those threats requires granular data on the losses experienced in your town, or even in your neighborhood. Your broker can supply this data and help you understand the levels of risk you may be assuming by reducing or eliminating different types of coverages.
  • Attachments and values. If everything in your home was lost tomorrow, you may not wish to replace every item. In fact, not every item is replaceable. (That Rococo chair you inherited from your grandmother may have great sentimental value, but would you hunt down a replacement if it was lost?) Reviewing what you really need to protect will help you find the right level of coverage and potentially lead to premium savings.

Contact a HUB Private Client Risk Advisor to learn more about assessing your property insurance needs.

1 The Philadelphia Contributionship, accessed April 25, 2024.
2 Florida International University’s International Hurricane Research Center, Florida Public Hurricane Loss Model, accessed April 25, 2024.
3 Source: Policy Genius. https://www.policygenius.com/homeowners-insurance/wildfires-by-state/