Insurance cancellation notices have hit millions of homeowners from Florida to Long Island. But owners of one type of dwelling are far less likely to get such letters anytime soon: those with multimillion-dollar homes.

Insurers are more inclined to cover a high-value home vs. a less costly one because it's good for business. These homes command higher premiums, and their owners sometimes also buy umbrella coverage for extra liability protection.

But the main reason insurance companies like high-value homes is reduced risk. Top-quality construction can make them a safer bet to cover than other homes -- sturdier against winds and earthquakes.

Insurers look for homes that can withstand dangers they are likely to face in high-risk areas, especially coastal regions, says Robert Hartwig, president of the Insurance Information Institute.

"Along the coast, newer homes tend to be of higher value, but they're also better constructed," he said. "The fact of the matter is (high-value homes) are built like bunkers."

Some top meteorologists predict heavier than normal hurricane activity over the next 15 to 20 years. That, along with recent wildfires in Southern California and the ever-present possibility of earthquakes, keeps insurers worried.

The hurricanes of 2004 and 2005 bankrupted Florida's fourth largest insurer, Poe Financial Group. Katrina alone cost insurance companies $41.1 billion. The tropical troubles spurred a wave of policy cancellations across riskier parts of the country, as the industry sought to avoid another big bill. Average homes still remain the bread and butter of the insurance business nationwide, Hartwig says.

Castles Curb Risk

Advanced building practices and technologies can help stave off disaster, but come at a cost that only buyers of high-value homes routinely can afford. Fortification techniques and materials can add 3% to 10% to the cost of building a home, according to the Institute for Business and Home Safety, an insurer-backed interest group.

To withstand high winds, exterior walls are made of steel-reinforced concrete or concrete-filled cinder blocks. They are anchored to a home's foundation and firmly attached to the roof. Windows are made with impact-resistant glass that can handle hurricane winds.

Chubb Corp. (CB) unit Chubb Personal Insurance has insured high-value homes for almost three decades. It does insurance appraisals on about 25,000 homes a year. The average price of a home it covers is $1 million, said James Fiske, the section's national marketing manager.

"There is some truth to the statement that high-end homes are a safer bet," Fiske said. "We have documentation that during the 2004 and 2005 hurricanes, high-end homes, especially newer ones, fared much better."

Chubb provides an extended replacement cost of twice whatever the dwelling limit might be, Fiske said. For instance, if a home was insured for $1.5 million and it was destroyed, the owner would have up to $3 million to rebuild the home.

"However, there is almost no connection to what you pay for a home and what it costs to rebuild it," he said.

Insurance rates for high-value homes vary with an area's risk. A high-end home in relatively-safe Ohio would cost less to insure than in Florida or California, Fiske says.

Specialty insurers are springing up to cater to high-end homeowners. One is PURE Risk Management. It started covering homeowners this year, just in Florida.

"We are very selective and to get membership into PURE your home needs to meet certain criteria, not only in size, value and distance from the coast, but in construction quality," said Chief Executive Ross Buchmueller. He founded policyholder-owned PURE, short for Privilege Underwriters Reciprocal Exchange, after starting up a private client division at insurer American International Group (AIG) .

PURE insures homes with replacement cost typically ranging from $1million to $10 million, Buchmueller says. Its business has been brisk amid the insurance tumult in Florida. Many insurers have dropped coverage in the state or left altogether, after incurring losses and running up against rate freezes mandated by the state.

Protect At A Price

What does it cost to insure a high-value home? Buchmueller says an average PURE client pays a premium just under $10,000 a year for a $1.8 million home. But, he says, if that home was located in vulnerable Miami Beach, the rate would run closer to $24,000 a year.

Typically, Buchmueller says, high net worth clients take on a deductible of 2% to 5%, which can lower their premiums.

Chubb offers clients 2% credits for various home safety features. Owners can get up to 15% off their premiums this way in most states.

Some of the things Chubb credits for are lightning rods, surge protectors, back-up communications for alarm systems, seismic gas valve shut-offs and low-temperature sensors in colder climates. Having a full-time caretaker also warrants a 2% credit, as someone is always around to keep an eye on the house.

Widen The Net

Insurers feel they can minimize losses by covering high-end homes, but also benefit from tie-in business, Buchmueller says. Wealthy homeowners are more apt to buy an umbrella policy, which can hike an annual premium by $1,000 or more.

Homeowners tend to bundle all properties under one insurer. Buchmueller says his clients have other assets to insure beyond a main home, including vacation homes, luxury cars, boats, art and jewelry.

Diane Saatchi, senior vice president for Corcoran Realty, has sold homes for 20 years in the wealthy towns of Southampton and East Hampton, N.Y. She says she has never had a home sit on the market because it was too expensive to insure or couldn't get coverage.

The homes Saatchi sells range from $1 million to $40 million. Insurance premiums begin around $5,000 for a $2 million home away from the coast, she says. "My clients might be surprised by the cost of premiums, but they're not dissuaded by it. This is a population that has not curbed their buying habits because gas prices or interest rates have gone up," Saatchi said. "And they're certainly not going to change their lifestyle because their annual premiums have increased."

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