You might think an older home's insurance premiums would be much lower, but they're actually higher because of the increased upkeep required to maintain an older home. We found that for a home that is 20 years old, the average home insurance premium can be 56% more expensive than the average rate for a new home. However, there are ways you can reduce costs and maintain that vintage home you've always wanted.
This article covers:
How much does home insurance cost for older houses?
Home insurance rates usually increase as your home gets older. To give you an idea of how much premiums can increase as your home ages, we included the average annual premium based on the age of your home.
Data was provided by Quadrant Information Services. Premiums were calculated using rates from New York. Your rates may vary.
Rates tend to to go down and stabilize after 40 years, possibly due to updated systems. In order to get the best home insurance policy, shop around and compare quotes.
Why do older homes cost more to insure?
Older homes tend to have older systems such as electrical wiring, plumbing and HVAC, which can cause major failures and lead to claims. Insurance premiums rise for older homes in order to safeguard against the increased risk of something going wrong that triggers claims. And more often than not, older homes weren't constructed to the current standards and building requirements of today's homes. Modern homes don't typically have as many problems as older homes because they're built to current safety codes.
Like any other insurance plan, many different factors impact your homeowner's insurance premium. Even if your home is old, updating core systems, like the electrical wiring, can help lower your rates. However the location, age, building materials and your credit history can also affect how much your insurance policy costs.
Components of old homes that may cause problems
Because older homes are well-worn, they usually require more care. It's important to thoroughly inspect an older home before buying it. You should even consider an annual "checkup" to ensure that everything is working correctly.
It's important to have accurate information about any issues the home already has. From there you can assess what you need to fix and monitor for any new issues. Sometimes a house will be in such a poor state that insurance providers won't even issue you a policy. Because of this, the home may have to be updated before you can purchase a policy.
Updating your home can reduce the chance of something going wrong that requires a claim, and a company will be more inclined to insure you. Some insurance carriers may also lower your premium if you add safety features to your home. Examples include security alarm systems, carbon monoxide alarms and smoke detectors.
Coverage options for older homes
If you want to insure an older home properly, you should consider adding certain coverages:
- Water backup coverage. If your home has an old sump pump, water damage due to its failure can be expensive. Water backup coverage can help repair damage from a backed-up drain or overflowing sump pump.
- Ordinance or law coverage. If your home needs to be repaired or rebuilt after a loss, you may be required to bring your home up to today's safety standards. Ordinance or law insurance coverage helps cover costs related to bringing your home up to code.
- Increase your dwelling protection. You can choose your dwelling coverage limit so that it's high enough to rebuild your home if it were completely destroyed. That means things like the local cost of labor and materials should factor into your dwelling coverage amount.
How to insure an old home vs. new home
There are a few things to consider when insuring your older home. You should first be aware of the difference between replacement cost and actual cash value. Replacement cost coverage pays you the full cost to repair or replace your home. Actual cash value covers a house for what it's worth at the current market value, including depreciation.
For an older home, replacement cost policies typically make more sense. That's because older homes are often more ornate and built with materials that are expensive or hard to find today. For example, what if your older home has a damaged plaster wall and you have an actual cash value policy? Your insurer may want to replace it with drywall because it's much cheaper.
There are two modifications of replacement cost coverage you might consider for your older home. One is extended replacement cost coverage. This pays a certain amount in addition to what the replacement cost is, depending on the cost of repairs and rebuilding. After national disasters, the cost of labor and materials goes up as everyone tries to rebuild their houses. Extended replacement cost coverage can protect you if the cost of rebuilding is more than the estimated replacement cost. Extended replacement cost coverage extends your policy limit by a certain percentage, which can be around 20% or 25%.
You may also want to consider guaranteed replacement cost coverage. If your home is older, it may likely come with unforeseeable problems. It's best to ensure that your policy covers the unexpected. With this coverage, your plan covers all the repair costs necessary, even if they're above your limit. However, your premium will be much higher.
Home insurance policies that cover older homes
Special home insurance policies exist to help maintain and repair older or historic homes.
Historic home insurance
The cost to replace a historic home is usually much higher than its market price. Many insurance providers agree it would be in a homeowner's best interest to purchase a historic home insurance policy. Not every provider insures historic homes, so it's important to get recommendations of specific providers, based on where you're located.
If you're unsure if your house is a piece of history, check your state's historic preservation office. They can tell you about the history of your home. You might be able to list your historic home on the National Register of Historic Places, but only if it fits into their list of qualifications. Depending on the history behind the property, the rules for its preservation are made by the state, county or region.
HO-8 insurance policy
If you're unable to obtain a historic home insurance policy, then you can get an HO-8 insurance policy for your older home. This is the ideal home insurance policy type for homes whose replacement cost exceeds their market value. However, this is an actual cash value policy, so it will cover a house for what it's worth at the current market value, including depreciation.
Compare companies to get the cheapest insurance rates for older homes.
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Determining if your home is old enough to need additional coverage
Most providers define an old home as one that was built at least 40 years ago. The age of the home can be determined by records, but also its features. Maybe your home has authentic wood paneling, a wraparound porch or hardwood floors hidden by carpet. Chances are, if a home comes with these historic features, it might also come with:
- Roofing and plumbing issues.
- Dry rot.
- Poor wiring.
It's important to perform frequent inspections and maintenance to keep wear and tear in check.
Filing claims on older homes
Filing multiple claims can hike up your insurance rates. If you're looking to file a claim, you should assess the damage before doing so. That way you can determine if you should pay for the repairs out of pocket.
Make sure you understand what is excluded from your policy. Depending on the type of homeowners insurance policy you have, damaged pipes or roofing might not be covered. You'll be out of luck when filing a claim for damage to either of these.
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