Homeowners Insurance for an Older Home
Many people love the quaint architectural details that come with older homes. Stained glass windows, wide hardwood floor boards, and other period touches lend a certain something that you just can't find in modern homes. Unfortunately, it's these same details that can make it incredibly difficult to find an insurance policy. In fact, some insurance companies refuse to offer policies for homes that are older than 100 years. If you're thinking about purchasing an older home, educate yourself about the insurance process.
What's the Big Deal?
Insurance policies are designed to cover the amount that it would cost to rebuild the home from the ground up in the event of a total loss. In a lot of cases with recent homes, the cost of the necessary materials is close to the market value of the home. Sometimes, the replacement cost is significantly less than the market value. When it comes to older homes with period details, though, the replacement cost is much higher.
Why? Part of it has to do with the time and skill involved with recreating these details. For instance, it's a lot easier and cheaper to replace the windows on newer homes. Local supply stores carry the windows and most contractors can easily install them. Intricate stained glass windows, on the other hand, are a lot harder to come by. The insurance company will have to find a special artisan to do the work. Additionally, a lot of the materials in older homes simply aren't made the same way. The wood used for hardwood floors, for example, is cut into thinner planks, and walls are plywood or sheetrock rather than lath and plaster. Smaller fixtures like light switches and door handles are also more expensive. All in all, a period home can cost more than a million dollars to replace even if the market value is much less.
The other problem is that older homes sometimes have details that could make damage to the home more likely. For instance, an older electrical system could cause a fire and an older roof could mean water damage from leaking.
Seeking Out Coverage
Due to the high cost of replacement, many insurance companies simply won't offer coverage for this type of home. Those who do often require the homeowner to pay significantly more in premiums. For instance, a policy on a newer home usually costs around $500, but a policy for a home that's 100 years old or more could easily come with a premium that's $1,000 to $3,000. If you're thinking about purchasing an older home, it's a good idea to put some feelers out about the cost of insurance before you put in an offer. Farmers Insurance, Chubb, Fireman's Fund, and a few other insurance companies specialize in this type of insurance.
Of course, a more typical insurance policy may be suitable for your older home if it's a simple farmhouse-style home, or if you don't care about matching all of the period elements exactly should the home need to be replaced. In general, it doesn't hurt to shop around. An independent insurance broker may be best suited to helping you find a policy that matches your unique needs.
Avoiding Insurance Mistakes
Underinsuring is probably the biggest mistake that homeowners make when insuring an older home, especially when it's a first home. When you sign up for insurance, you may not realize that the company would try to use a cheaper material to replace the walls, floor, or basic structure. You may not even realize that the materials used to build your older home are out of the ordinary based on today's standards. It's only when the unthinkable happens that you realize you're going to lose those small details you love about your home. If you love the "charm" of your older home, it's essential to talk to an insurance agent who specializes in insuring older homes. This person will be able to recognize the different materials used in your home and help you build a policy that will cover these differences.
The other thing that homeowners may not realize is that an insurance company may cancel a policy after it learns that there is something dangerous about the home unless then homeowner is willing to make changes. Outdated electrical systems, for instance, are a big problem. These older systems were not built to carry the type of usage that most modern families are accustomed to. It creates a fire hazard.
Lowering the Cost of Insurance for Older Homes
If you just love your older home, you're not necessarily doomed to paying higher premiums. Try asking your insurance agent if there is anything you can do to reduce the cost of your home insurance. For instance, by making updates to the home that reduce the risk of damage, the company might lower your premiums. You could pay an electrician to modernize the wiring, have a plumber replace older plumbing systems, and get a new roof. All of these things modernize the home and keep it protected.
Another option might be to increase the deductible. In a traditional policy, your deductible might only be $500 or $1,000. Increasing your deductible to $10,000, though, will decrease your premium. Not all insurance policies offer this option, and you'll be on the hook for fixing small problems, but you'll be covered if you totally lose your home.
The key to insuring any type of home is to find a policy that is the right match for the home. Those who have older homes have more challenges than those who have newer homes, but it isn't impossible. Old home aficionados simply have to find a way to balance their love for historic looks with the amount that they're willing to pay for a homeowners' policy. Fortunately, insurance agents are there to help consumers work out these difficulties.