Need-to-Knows About Homeowners Insurance for Older Homes

Charming, quaint, unique. There are plenty of ways to describe and plenty of reasons to like an older home. Old houses have a lot more character than most modern, cookie-cutter developments, especially if a sentimental or nostalgic value is involved.

Owning a historic home can be a dream come true for some, but it calls for different homeownership necessities than a standard house. Here’s everything you need to know about homeowners insurance for older homes.

Insurance companies aren’t eager to cover old homes because they’re usually not up to the latest building codes and tend to have a lot of unique or old features that can’t be easily replaced if the house gets seriously damaged. If your old home is eligible for coverage, you’ll likely have a high premium. 

It varies by insurer, but some providers won’t cover any house over 40 or 50 years old. Even if the provider agrees to cover your house, your premium will likely be higher than a plan for a newer home. Insurance companies prefer to cover newer houses.

The most common type of home insurance plan is the HO3 form. It covers against a longer list of perils than the more basic HO1 and HO2 homeowners insurance policy forms do. If your house is exceptionally old, you might not qualify for an HO3 policy. 

While insurance companies might not put an exact age limit on your home that prevents it from being eligible for an HO3 policy, there’s a general rule of thumb: if the replacement cost of your home is more than its current market value, a provider isn’t likely to give you the standard HO3 coverage. 

An HO3 policy insures your house for its replacement cost. The replacement cost of your house is the amount of money it would take to rebuild it sufficiently in case of disaster. It’s derived mainly from construction costs and building materials.

If the market value of your home, what someone would buy it for, is notably lower than what it costs to build it, an insurer is losing money by potentially rebuilding something for way more than what it would sell for. 

This might be the case for your older home. But, you’re not out of luck. You can look into getting an HO8 policy.

An HO8 policy is specifically designed for older homes. If your house is old and in good condition, an HO8 plan may be more affordable than an HO3 policy, or it may be your best option if a company won’t give you an HO3 policy.

An HO8 plan includes the same aspects of protection as an HO3 plan, like personal property and liability coverage, but it guards your dwelling against fewer perils. For example, water damage is usually excluded from HO8 policies. 

An HO8 plan will also usually not cover your home for its replacement cost, since it’s probably higher than the market value. It will likely cover your home and contents for their actual cash value, meaning depreciation will be factored in when being reimbursed after filing a claim for a covered peril. Many features of older homes would be too expensive to fully replace regularly. 

You may be able to purchase added endorsements for your HO8 policy, like sewer backup or extended replacement cost coverage, to fill in some coverage gaps for your old home, too.

No matter what type of insurance plan you get for your old home, it likely costs more than a plan for a newly constructed home. Older homes are likely to have outdated features, old HVAC systems, and unique architectural designs that can’t be easily replicated. These present unnecessary risks and concern insurance companies.

Some common issues with old homes that drive up insurance premiums include:

If your house has aluminum wiring or knob and tube wiring, then your premium will be very high as a result since these wiring systems are known to be faulty and have historically caused costly and fatal house fires. You may be denied a policy altogether if your home has these.

An old house may have a cast iron or galvanized pipe system or a very old steel septic tank. These can pose issues like rust and general wear and tear, which can increase the likelihood of water damage to your home. This is one of the reasons water damage is excluded from HO8 plans and why having these present in your home will affect the cost of your insurance negatively.

The material your roof is made of, the way it’s attached to your home, and its shape all play a role in its effectiveness and lifespan. For example, a wood shingle roof is less durable than a metal one. Flat roofs tend to have more drainage problems than a gable or hip roof. Overall, older roofs are more likely to have structural issues, so houses with them cost more to insure.

Some old houses have unique features, fixtures, or an architectural style that you don’t see in contemporary construction. Even though these could be what drew you to buy the house in the first place, they also raise your insurance. 

Unique features like hand-carved fixtures and decorations, ornate fireplaces, and custom windows and doors can be costly, if nearly impossible, to replace if they were damaged. So, while their rarity is a pleasure to look at, they’re also hard to insure.

There are over a million properties on the National Register of Historic Places. The criteria for a house to be included in the list of registered historic landmarks is lengthy and specific. One of the qualifications, though, is the home must typically be at least 50 years old.

On top of this, a house must also retain some features from its period of historic significance. This can cause a house in the National Register to be especially unique and especially hard to insure. It’s almost a guarantee that a historic home’s replacement cost is higher than its market value.

As we’ve mentioned, this isn’t ideal for insurance. According to the Washington Post, premiums for insuring a historic home are typically about 20% higher than for a standard home. This is why historic homes are perfect fits for an HO8 policy. 

If you’re in the market to insure your old or historic home, you should compare plans from different providers to see who has the best homeowners insurance for older homes at the right price. This is what Clovered is designed for. Our online quote engine and archive of insurance-related information were made to help people be better informed and better served.