We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free – so that you can make financial decisions with confidence. The offers that appear on this site are from companies from which TheSimpleDollar.com receives compensation. This compensation may impact how and where products appear on this site including, for example, the order in which they appear. The Simple Dollar does not include all card/financial services companies or all card/financial services offers available in the marketplace. The Simple Dollar has partnerships with issuers including, but not limited to, Capital One, Chase & Discover. View our full advertiser disclosure to learn more.
Selling Sunset: How Much Does It Cost to Insure a $75 Million Home?
In the third season of Netflix’s Selling Sunset — which follows a real estate brokerage called the Oppenheim Group that specializes in luxurious Los Angeles homes — Davina scores a listing for a $75 million mansion in Beverly Hills.
It’s 18,000+ square feet on a one-acre lot, has a pool, guesthouse, movie theatre, gym and a wine cellar. Unfortunately for Davina, the house is widely acknowledged to be overpriced. It features no view (an LA essential for high-value mansions) and is right off a busy street. And along with a mortgage, potential buyers would also need to consider taxes and insurance.
California dreamin’ for $3.5 million
Many factors play into the cost of a home insurance premium, like the cost to rebuild, local risks and hazards, personal claim history and credit score — the same factors that influence your own home insurance bill. Despite the $75 million market value, the cost to rebuild the home is the biggest factor the insurance policy is based on.
“For example, if the home was destroyed in a fire — how much would it cost to reengineer the home, remove all of the burnt materials and rebuild? In many cases, it costs more to rebuild a luxury home than it does to build one from scratch,” says Clausen.
Calculating that cost typically involves a consultation with the original builder and an inspection from the insurer’s risk management team, but Clausen used his experience insuring high-value homes to give us an idea. He estimates $37 million to rebuild, imagining it costs $2,000 per square foot.
Then you’d need to factor in the catastrophic risk potential. For this home, the number is higher because of its location. “The catastrophic risk potential in California makes it a unique environment for homeowners insurance — especially for homes with over a $5M rebuild cost in high-risk wildfire zones,” adds Clausen.
Keeping up with the hazard zones
Southern California homes have earthquake and wildfire coverage to consider. Clausen points out that this 90210 property sits in a “very high fire hazard zone.” According to Clausen, depending on the hazard coverage and how the insurer assesses that risk, the policy could range from $220,000 a year to $3.5 million per year.
Clausen also told us that the California home insurance market is particularly difficult. Many insurers have left the market, making premiums rise amongst existing insurers. In 2018 insurers paid over $13 billion in losses from wildfires.
“It makes it difficult for insurers to stay in the California market because, in many cases, they are unable to charge enough premium to match the risk. Eventually, the insurers stop writing new policies and decide to pull out of the state because they have sustained such heavy losses and can’t make an underwriting profit,” says Clausen.
Beverly Hills homebuyers have to contend with more than a high price tag if they’re considering the star home of Selling Sunset — millions more will need to be factored in for insuring the home. Good luck, Davina!
We welcome your feedback on this article. Contact us at email@example.com with comments or questions.
Image Credit: Bulgac / Getty Images