Homeowners Insurance for Older Homes
Do you own, or are you thinking of purchasing an older home? If so, read on to learn what you need to know about homeowners insurance and older homes.
You might not be aware of the extra costs that go into insuring and maintaining older homes.
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. Depending on your policy choices, industry professionals warn that your premiums will be about 20 percent higher.
Repair and maintenance work comes with owning an older home. And insurance premiums rise in order to safeguard against the increased risk of something going wrong that trigger claims.
More often than not, older homes weren’t constructed to the current standards and building requirements of today’s homes. Modern homes don’t have as many problems as older homes. That's because they're built up to current safety codes. And the electrical wiring, plumbing, HVAC, etc. are much newer.
Like any other insurance plan, many different factors impact your homeowner’s insurance premium. The location, age, building materials, credit history and more can all affect how much your insurance policy will cost you.
Buying and maintaining an older home may seem daunting. But there are ways you can reduce costs and maintain that vintage home you've always wanted.
How to Insure an Old Home vs. New Home
There are a few different things to consider when insuring your older home. You should first be aware of the difference between replacement cost and cash value. These two concepts can be complicated. And the specifics can vary from policy to policy. 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 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.
Even a replacement cost policy could be capped at 20 or 25 percent over the insured value of the home. Be sure to ask your agent or broker if the policy they're trying to sell you has such a cap.
There are two permutations of replacement cost coverage you might think about 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 the repairs.
Another part of the homeowner’s insurance policy you might want to consider is guaranteed replacement cost coverage for your home. If your home is old, it will most likely come with unforeseeable problems. So it's best to ensure that your policy will cover the unexpected. With this coverage, your plan will cover all the repair costs necessary, even if they're above your limit. However, your premiums will be much higher.
Learn more about Actual Cash Value vs. Replacement Cost and how it relates to properly insuring your older home.
Historic Home Insurance
The cost to replace a historic home is usually much higher than its market price. So many insurance providers agree it would be in someone’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 unable to obtain a historic home insurance policy, don’t worry, there are other good options. There are many categories of homeowner’s insurance policies that one can purchase. But many providers will suggest the home owner’s insurance special form 8 or HO-8 for historic homes. This is the ideal home insurance policy type for homes whose replacement cost exceeds their market value.
Components of Old Homes that Cause Problems
Because old homes are well-worn, they usually require more care. For this reason, insurance providers will charge more because more problems will be associated with the home. 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.
Sometimes, a house will be in such a 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.
The parts of an older home most likely to fail are the roof, plumbing and piping, and the electrical system. Some insurance carriers will lower your premiums if you add safety features to your home. Examples include alarm systems, carbon monoxide alarms, and smoke detectors.
Updating your home will reduce the chance of something going wrong that requires a claim. And a company will be more inclined to insure you. It was also keep your home up to par with safety standards, which insurance companies love.
Filling Claims with Older Homes
Your older home is going to have some wear and tear. So updating and repairing your home might be the best bet. A better one than filing multiple claims and hiking up your insurance rates. If you're looking to file a claim, you should probably assess the damage before doing first. That way you can determine if you should just pay for the repairs out of pocket.
Many providers suggest that you only file a claim when you absolutely need to. Filing multiple claims in a short period of time could result in the insurance company raising your premiums. They could even cancel your policy outright.
The amount that your premiums increase after an insurance claim is dependent on a variety of different factors. The two biggest factors are the cost of the claim, and how many claims you've filed with that insurance provider.
Insurance Red Flags
The most important thing is 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.
Make sure you understand what is excluded from your policy. Depending on the specific 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.
You should also pay attention to the cost of the deductibles. Double check it before adding to your policy, getting a new one, or filing a claim for your home.
Older homes come with their own personality. They can also come with some issues. But you can keep your older home in good repair and enjoy it for many more years. It can be easier if you have the right amount and type of insurance coverage
Get a quote now and compare homeowners insurance rates from top companies and local agents.
Older Home Insurance FAQ
Q: How do I determine whether or not my home is old enough to need additional coverage?
A: 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 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
- And more
So, it's important to perform frequent inspections and maintenance, to keep any wear and tear in check.
Q: How do I determine whether or not my home is historic?
A: If you're unsure if your house is a piece of history, check out your State 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 behind its preservation are made by state, county, or region.
Q: Do I need to increase my insurance coverage when renovating or restoring an old home?
A: The short answer is that it depends on how much and what type of coverage you currently have. It also depends on whether you're doing the work yourself or you’re hiring contractors. We wrote a guide to walk homeowners through insuring their home remodeling project.
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