Homeowners Insurance for Older Homes

Homeowners Insurance for Older Homes

Before we delve into the topic of getting homeowners insurance for older homes, we must first answer the question, “Just what counts as an ‘older home?’” If you watch a lot of HGTV’s Fixer Upper or other home improvement shows, you might define an ‘older home’ as one built in the 1920s, 1930s or 1940s.

Your frame of reference might also be created by your age. If you’re in your 50s, an ‘older home’ might be in that range of pre-1940s houses, and if you’re in your 20s, your version of an ‘older home’ might have been built in the 1980s or 1990s.

An ‘older home’ doesn’t necessarily have to be an old home.

What constitutes an older home to insurance companies?

The big issue in any home is the codes to which the home was built. This depends on what the codes were upon construction and also the codes adhered to during any renovations or repairs. So while even though your 1970s-era home may be in solid shape, if you had to repair or rebuild it now, your homeowners insurance policy might cover only what you had there before repair is needed.

This is something many people don’t think about when they’re searching online for homeowners insurance for older homes, a valuable factor that your financial advisor and insurance agent can advise you on. If you’re flying solo in your homeowners insurance search, you could make a common error in expecting your home insurance coverage to cover the cost of new work, repairs and rebuilding as priced currently.

Bringing your home up to current building codes

In order to rebuild a room, it has to be brought up to code. In older homes, you could face confusing rules and greater expense because building codes change all the time, quite often throughout the years. And you’ll want your smartly-created homeowners insurance policy to cover your needs now.

In your policy, an ‘ordinance and law coverage’ section can clarify your terms and protect you further. It’s a question to pose to your insurance agent for greater clarity on what is needed in your homeowners insurance policy no matter how old your home is right now, since this issue can apply to your relatively new home’s insurance needs twenty years from now.

Different insurance policies have different terms for this. Some include coverage for older homes’ code improvement and repair needs, and some policies offer an ‘endorsement’ that you would have to purchase to be better covered. Again, your financial planner and insurance agent can help you navigate the different policies and terms to help you cover your unique older home insurance needs.

Homeowners insurance advice from your financial team

You may be wondering why a financial planner is needed for this task. A good, local financial planner can help you better understand the financial implications of homeowners insurance policies and can recommend top-notch home insurance agents. Think of it as a knowledgeable team better suited to guide you past the mistake of shopping for quotes online without giving a thought to codes and other issues you’ll face as you decide on older home insurance coverage.

You can always find a cheaper homeowners insurance policy quote online. But remember that if a company can reduce the price of a policy, they have probably cut some stuff out. It’s more important, especially for the challenges of insuring an older home, to pay extra for the best coverage you can get.

Insurance is not a commodity. Finding and creating the best policy for your home is a smart step in protecting your finances and your family.

For more information, listen to our discussion on homeowners insurance for older homes.

Posted in Insurance.

One Comment

  1. Most agents use a cost estimator to figure cost replacement estimates. This will ensure that your home is insured for the correct amount. Insurance companies do not insure dirt. If you buy a home that includes a large lot, do not be astonished when you receive an insurance policy for a lot less than what you paid for the home. This is because you are buying coverage for the home and not the land.

    In the past, replacement coverage was called Guaranteed Replacement Cost. There is no such coverage anymore. Today it is Replacement Cost Coverage, which means each insurance company designates a percentage of additional coverage on top of the insured amount. This is designed to protect the homeowner who has suffered a loss from having to pay additional construction costs to rebuild. It can cost more to build because of inflation or simply because material prices have increased. For example, if the dwelling coverage is insured for $300,000, and the company has 125 replacement cost coverage, the homeowner would receive an additional $75,000. I recommend 200 replacement cost coverage, which gives homeowners double the coverage.

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