Cost & Coverage
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Insuring an older home can be just as easy as insuring a newer home, but your insurance premiums may be higher depending on its age and build. If insurance for your older home is unaffordable, there are a number of ways to lower your premiums.
Older homes are generally more expensive to insure than newer homes
There are a number of ways to lower your premiums — like raising your deductible and replacing the roof, electrical work, and plumbing
There are multiple insurance companies that specialize in insuring old and historic homes — you can find these companies through the National Trust for Historic Preservation
Old and historic homes can be enticing buys — maybe all the place needs is a renovated kitchen to officially become your dream home, or maybe you’re a developer who restores and flips older homes for a living. But despite being potentially cheaper than a newer home, your older home may be costing you more to insure.
Older homes are viewed by homeowners insurance companies as “high-risk” — they’re fragile, construction materials are more obsolete, and certain structural components like the roof or plumbing may not be in very good shape — and therefore homeowners insurance premiums for old homes are generally higher than newer homes. Some homeowners insurance companies may even refuse to insure homes with old roofing or homes with cosmetic or structural damage.
But there are also plenty of ways to make your older home more insurable and keep your insurance premiums down. Replacing the roof, installing new plumbing and replacing old aluminum wiring with copper wiring are just a few ways to mitigate high homeowners insurance costs.
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If you own an older home — say, a Victorian or Dutch colonial house from the early 20th Century — it contains obsolete building materials and ornate features that are specific to the time period in which it was built. Plaster walls, stuccoing, custom architectural details are all common characteristics and stylings of pre-war homes and are more expensive and less flexible than modern structural materials like sheetrock, plywood, and drywall. Additionally, the masonry work and labor intensive makeup of older builds require a contractor who is skilled in period architecture, and those contractors may charge a lot more for their services than a modern-home contractor.
Generally speaking, the replacement cost of an older home is going to be higher than a home with a modern build but a similar market value. Since your insurance premiums are largely based on the home’s replacement value as opposed to its market value, the basic architectural styling of your older home could be the reason for its high insurance premiums.
Certain details in the home may also be impacting your homeowners insurance rates. Homes with aluminum wiring are more likely to have accidental fires, and homes with polybutylene or galvanized piping are more likely to corrode and deteriorate faster than modern pipe like PVC. If your roof is more than 15–20 years old, that could also impact your rates and your insurance company may even exclude the roof from coverage.
Depending on its age and architectural style, you may be able to cover your home with a standard homeowners insurance policy. But since many historic homes can cost up into the millions of dollars to rebuild, you may need to get specialized high-value homeowners insurance to cover the home up to its full replacement cost. National Trust Insurance Services (through its subsidiary the National Trust for Historic Preservation) works with multiple insurance companies that specialize in insuring older, high-value properties with a replacement cost that far exceeds the home’s market value.
You also have the option of insuring your older home with an older home insurance policy, also referred to as an HO-8 policy. An HO-8 is for homes where the cost to rebuild is greater than the market value, according to the National Association of Insurance Commissioners. However, HO-8 homeowners insurance only reimburses you for damage on an actual cash value basis, which means the home’s replacement cost minus its depreciation. That means if your home incurs a loss, this policy probably won’t reimburse you for the more expensive historic building materials.
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If you own an older home, consider the following types of protection in your homeowners insurance policy:
In the event of a total loss, there’s no telling how much it will cost to rebuild your historic home. You may have $1.5 million in coverage, but by the time the home is rebuilt and fully restored to its previous condition, it may end up costing an extra million on top of that. That’s why if you have the option, you should consider a policy with extended or guaranteed replacement cost coverage. With extended replacement cost, your dwelling coverage is automatically increased an additional 25–50% in the event that your coverage limits are maxed out. Guaranteed replacement cost coverage is even better, reimbursing you for the full rebuild of your home regardless of how much it costs.
Water backup coverage covers your home and personal property against sewer or drain backups and is the perfect coverage add-on for a home with old piping.
Service line coverage covers utility lines that run from your home to the street for which you, the homeowner, are personally responsible. If you live in an older home, there’s a good chance that your utility lines are old as well — a service line coverage endorsement is an invaluable add-on to any policy.
Many older homes are styled and furnished with antiques and artifacts that were indicative of the period the home was built. Your furnishings are covered under the personal property coverage component in your policy, but certain expensive valuables are protected by a limited amount of coverage — also known as a sublimit. To increase the coverage limits for that antique china set or rug, you’ll need to add a scheduled personal property endorsement to your homeowners insurance policy.
In the event of roof damage, some companies may only reimburse you for the roof’s actual cash value if it’s beyond a certain age, in some cases 10-to-15 years old. If that’s the case with your home, check with your insurance company to see if the roof is covered for its replacement cost. If it’s not, check to see if your insurer offers roof replacement cost coverage for an additional premium.
If your homeowners insurance premiums are making your home unaffordable, you should first ask your insurance agent what the culprit is. Often the solution is something as simple as raising your deductible, but there are a number of other ways to lower your premiums.
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