By Mark Galante, PURE Insurance

Whenever a natural catastrophe occurs, the issue of underinsurance is illuminated in the mainstream press. Once again, everyone is reminded of the crippling financial effect that being underinsured can have, not only on a household, but on a community. Avoiding underinsurance requires the right coverage combined with the right limits. In exchange for providing generous coverage like guaranteed replacement cost, specialist insurers invest heavily on appraisal services to determine the appropriate coverage limit: insurance to value. Those of us who  live in this niche know that determining the right limit is hard, and that the process can create great policyholder frustration, even distrust. Nonetheless, the process is critically important. Embracing the following principles allows carriers to manage valuations prudently, collect the appropriate premiums for the risks assumed, and delight their policyholders in the process.

A well-constructed insurance program blends smart, comprehensive coverage options with appropriate coverage limits. Successful individuals and families with significant assets are best protected by the coverage options offered by high net worth specialist insurers like PURE and the personal insurance divisions of ACE, AIG, Chubb, & Fireman's Fund. There are many examples of how the specialists' coverage forms are more generous than those offered by more mainstream providers, but one of the most common features cited as a differentiator on the homeowners form is guaranteed replacement cost, or extended replacement cost when an uncapped guarantee is replaced by a hefty extension of coverage.  Guaranteed replacement cost provides tremendous peace of mind to consumers—particularly owners of custom homes with unique features—as it promises to repair or replace a covered home in "like, kind, and quality," even if the cost vastly exceeds the applicable coverage limit purchased.