Older homes (i.e., greater than 40 years old) present extra risks for home owners; thus, special insurance needs may arise. The following are some factors and tips for you to consider when purchasing insurance for your older home.
- Increased construction costs. In some cases, building ordinances can increase rebuilding costs by 30 percent or more. Thus, an ordinance or law increased limit (HO 04 77) or similar endorsement is worthy of consideration. This endorsement provides higher limits for rebuilding an older home when an ordinance will increase the cost.
- Difficulty in estimating replacement cost. Older homes are often constructed with materials and using techniques that are either no longer available or extremely expensive to duplicate, making it quite difficult to accurately forecast what the cost would be to rebuild following a loss. As a result, there is a risk that the value for which your home is insured is too low. Sometimes a guaranteed replacement cost endorsement is available to protect against this contingency. With it, the insurer will pay the actual replacement cost to entirely rebuild your home after a total loss, even if it is much higher than your dwelling limit. If guaranteed replacement cost coverage is unavailable, consider extended replacement cost coverage, which might allow an additional 20 percent or 30 percent of the dwelling limit in the event of a total loss to your home.
Historic homes pose even more challenges for home owners as they are typically subject to historical renovation regulations. Here are some recommendations worthy of consideration for your historic home.
- You should avoid any type of functional replacement cost endorsement because this allows less costly construction materials and methods to be used to repair your home. These materials and methods may reduce the value of your home.
- If you want to replicate custom or historical features of your home, such as stained-glass windows, antique wood floors, ceiling moldings, or hand-carved banisters, ask us about a restoration cost homeowners policy or about adding an endorsement onto your policy providing this coverage.
- If you are planning any type of restoration to your home, make sure you hire contractors and architects that specialize or have experience in restoring historic homes. Note that the local historical commission typically has to approve any renovation plans.
International Risk Management Institute, Inc.