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Homeowners insurance for older homes

The home of your dreams may be a nightmare to insure if it's an older home or in a disaster-prone area. The same can be true if the home has a checkered claims history.

It doesn't necessarily mean you can't find homeowners insurance, but you may end up paying a steep price.

"We continue to see a spike in homeowners insurance premium rates across the U.S., particularly in Midwest and Gulf Coast states that are impacted by tornadoes, hurricanes and other severe windstorms," said Mark Friedlander, the St. Johns, Florida.-based director of corporate communications at the Insurance Information Institute (III).

The average U.S. home insurance premium was $2,305 for $300,000 dwelling and $300,000 liability coverage with a $1,000 deductible in 2020. However, Oklahoma homeowners paid the highest average home insurance premium ($4,445), followed by Kansas ($3,931), Florida ($3,643), Arkansas ($3,439) and Texas ($3,429).

Most people buy home insurance on the standard market. However, millions of homeowners around the country are forced to purchase coverage on the residual market. Each state sponsors that market, which provides coverage when it's not available through traditional private home insurance companies.

About 5.7% of homeowners file a claim each year, per the III. Property claims, such as thefts, account for 98% of claims. While wind and hail are the most common property damage claims, fire and lightning are the most costly home insurance claims on average ($79,785).

If you own one of these hard-to-insure homes, you may have to dig deep into your pockets to get the insurance coverage you need.

Why does it cost more to insure older homes?

Older homes may have charming architectural features and distinctive designs. However, homes built many decades ago are usually more costly to repair and update. That's a big reason why it's more difficult and expensive to get home insurance for older homes.

"Older homes are much riskier to insure than newly-built homes because they were constructed with materials that are less resistant to fire and impacts of severe weather events," notes Friedlander. 

He adds that most older structures were also built according to now-obsolete construction codes, which pose safety hazards.

"Many older homes contain outdated electrical wiring and antiquated plumbing, which can create all types of hazards. And typically, the replacement costs for an older home run much higher than the market value of the property," Friedlander says. "That's why insurers consider them an underwriting risk and charge a higher premium compared to newer construction."

Homeowners insurance for older homes in Florida

Say you want to buy a vintage residence in Tampa. You're likely to find that home insurance for older homes in Florida is difficult to find unless that property has been modernized to some degree.

For example, home insurance companies are likely to shy away from older homes with electrical and plumbing systems or roofs not updated or replaced.

If possible, provide your insurer with blueprints, receipts, photographs and other documentation to demonstrate the remodeling and upgrades that you've made.

HO8 policies

Home insurance companies have created a special policy, called an HO8 policy, for older homes that are at least 40 years old. This policy is designed to safeguard homes where the replacement cost is much higher than the home's current market value.

"This type of plan is easy to understand and typically affordable," Friedlander says. "It will safeguard older homes for common hazards included in a standard homeowners policy."

Among the common hazards covered in an HO8 policy are:

  • Fire
  • Smoke
  • Windstorms
  • Hail
  • Lightning
  • Aircraft
  • Vandalism and malicious mischief
  • Theft
  • Riots and civil disturbances

"But an HO8 policy usually does not cover water damage caused by things like a burst pipe or leaking roof, flood damage, falling objects, power surges or earthquakes," notes Friedlander.

Coverage options for older homes

Underinsuring is one of the biggest mistakes homeowners make with older homes. If you want to insure an older home appropriately, the III recommends adding these optional coverages, if applicable:

  • Increased dwelling protection - This replacement cost coverage handles the cost of rebuilding your home if it's destroyed by a storm, fire or other risk defined within your policy.
  • Water backup coverage - This helps pay to repair damage from a backed-up drain or sump pump.
  • Service line coverage - This protects against unexpected expenses related to the damage of service lines, such as phone, cable and power lines and water and sewer pipes. "It also covers the potentially costly expenses of excavation and repair of underground wiring and piping," notes Friedlander.
  • Building code coverage - This helps cover additional construction costs if your older home's damaged parts need to be repaired to meet current building codes.
  • Flood insurance - Be aware that flood insurance isn’t typically included in a standard home insurance policy. "Most communities across the country are at risk of flood, as 90% of U.S. natural disasters involve flooding," says Friedlander, who adds that flood coverage is available through FEMA's National Flood Insurance Program and dozens of private insurers.

Cost of homeowners insurance for older homes

Friedlander says insuring older homes can be expensive and typically runs much higher than newer structures.

"It's not uncommon to see premiums for older homes at 75% or more above the rate for newer construction in the same market," he says.

One strategy for saving on your insurance premiums for an older home is to adjust your deductible to a higher amount if your insurer allows it. Higher home insurance deductibles usually mean lower premiums. 

"A traditional policy deductible is either $500 or $1,000. Increasing that to $5,000 may save you as much as 20%," suggests Friedlander. "However, you will be responsible for fixing small problems. Still, you will be protected if you lose your older home to a peril defined in the policy."

Best homeowners insurance companies for older homes

Friedlander says many national and regional insurers offer coverage for older homes in markets across the country. 

When shopping around for coverage, be sure to compare the same sets of home insurance coverages, limits and deductibles for each insurance quote you receive to get the best protection for your older home.

Here are recommended home insurance carriers that provide coverage for older homes and their advantages:

  • Allstate: A++ AM Best rating, A+ BBB rating
  • Chubb Ltd. Group: A++ AM Best rating, A+ BBB rating, works directly with the National Trust for Historic Preservation
  • Nationwide: A+ AM Best rating, A+ BBB rating
  • State Farm: A++ AM Best rating, A+ BBB rating
  • Travelers: A++ AM Best rating, A+ BBB rating

Homes in disaster-prone areas

Each year, the United States gets hit with dozens of disasters, including hurricanes, earthquakes, tornadoes and wildfires.

And while you probably adore your beachfront home or secluded nature retreat, you're probably paying big bucks for home insurance because of the risks tied to the location.

But you can take steps to decrease those risks. If you live in an area that's prone to wildfires, you can clear brush from around your home or make sure your roof is made from non-combustible materials. Or, if you live in a hurricane-prone area, you can add hurricane shutters or install straps to secure your roof.

The standard home insurance market is more likely to insure you if you've taken appropriate measures to mitigate the likelihood of wind damage.

Homeowners insurance for homes in need of repair

It can be more challenging to get home insurance coverage if your house needs repairs.

"Fixer-upper-type homes are considered a higher risk for insurance providers," cautions Chris O'Rourke, vice president of property claims at Mercury Insurance in Brea, California. "The process of fixing up a home comes with its own insurance risks, such as structural problems with the house itself or risks that come with any construction, in addition to the usual losses homeowners insurance covers -- such as fires or windstorms."

Often, you can’t get a standard homeowners insurance policy for homes that are under repair or construction.

"When you request a homeowners insurance quote on this type of home, the carrier will often require an in-person inspection. They will notice the issues in need of repair and require you to make the needed repairs to obtain a policy," says Stacey Giulianti, chief legal officer for Boca Raton, Florida-headquartered Florida Peninsula Insurance Co. "Or, you may be required to purchase a builder's risk policy or a similar type of higher-risk coverage."

Alternatively, "the insurance company may cover your home but exclude the parts of the home that need to be repaired," says Heath Ritenour, Chairman/CEO of Insurance Office of America in Longwood, Florida.

Vacation homes

Your vacation residence may be your personal retreat, but because it's unoccupied much of the year, it can be challenging to insure.

Home insurance companies like people to occupy homes. If you’re not there, a water leak or similar issue can go undetected and cause major damage. 

It also can become a magnet for thieves. Homes that are known to be unoccupied for a long stretch can get the attention of unscrupulous individuals, who may view the home as an attractive target to damage or rob.

Installing a burglar and fire alarm can help decrease your risks, as does asking neighbors to help keep an eye on your property when you’re not around.

Homes with a trampoline or pool

Having a swimming pool or trampoline might make for good outdoor fun, but your homeowners insurance company may see them as an attractive nuisance that can tempt children to come into your yard when you're not home.

Someone could get injured on your trampoline or hurt or killed in your pool -- and you could be sued.

Some home insurance companies may refuse to insure your home if it has a pool or trampoline or they may charge higher rates. Having a pool or trampoline won’t break the bank, though. The average rate increase for having a pool or trampoline is less than 1%.

Putting a locked fence around your pool and having a net around your trampoline could help reduce risks, too. 

Homes with certain pets

Americans love their dogs. Certain breeds can be expensive -- not in terms of what you pay for them, but for insurance liability.

Home insurance companies paid $797 million in liability claims related to dog bites in 2019. Based on III data, the average dog bite claim is $44,760.

You may find your insurer will set limits on the amount it will pay for a dog-bite liability claim. In that case, you would have to pay the rest out of pocket. Or it could even deny you coverage if you own certain breeds, such as a pit bull. In some cases, you can only get coverage if you take your dog to obedience classes or make sure it's restrained.

Vacant homes

You got a great deal on a vacant foreclosed home, but insuring it could cost you.

You'll need to have a home inspection to determine the extent of the problems -- and the length of time the home might need to remain vacant while it's undergoing repairs.

Homes that have been vacant for long periods deteriorate faster than those that are occupied. And they can draw unwanted attention from bad guys.

Even a major remodeling project on your current home -- regardless of whether you need to move out or not -- can cause additional insurance concerns, such as liability and workers compensation insurance.

Farmers Insurance, for example, offers coverage to protect you from vandalism and coverage for certain perils, such as fire or wind damage, if your home is unoccupied.

Homes with a lengthy claims history

It may not even be your fault, but owning a home with a lengthy claims history can drive up your rates.

Experts recommend purchasing a CLUE (Comprehensive Loss Underwriting Exchange) Home Seller's Disclosure Report, which has information on the insurance claims filed at the home over the past five years.

A history of multiple claims could indicate major maintenance or structural problems with the home.

When you can't find home insurance

When all else fails and you can't find insurance with a private company, look to the residual market.

In fiscal year 2019, these home insurance policies covered nearly 1.4 million homes, according to the III.

Most states have Fair Access to Insurance (FAIR) plans, five coastal Southern states have beach and windstorm plans and Florida and Louisiana have state-run insurance companies that offer hybrid homeowners insurance plans.

Florida has by far the most insurance policies covered under these plans, which has shown significant growth over the past year due to the volatility of the state's private property insurance market, according to Friedlander.

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