Home insurance is among the most important insurance products as it provides some financial protection for the largest investment most individuals make in their lifetime. However, it can be difficult for individuals to assess accurately the value and adequacy of their insurance policies, particularly regarding properties that are unique such as historic homes. To be classified as a historic home, a property must meet certain criteria. Further, properties classified as historic often require specialized insurance due to their characteristics. This guide will cover how to identify historic homes and the essentials of adequate insurance coverage.
There is significant interest in historic homes in the United States. Millions of individuals have visited historically significant and aesthetically pleasing buildings, including houses, neighborhoods, and even districts. The National Register of Historic Places evaluates and recognizes historic properties according to specific criteria. Generally, properties considered historic are associated with at least one of the following:
Events, activities or developments that were important in history,
The lives of influential or historically significant individuals, or
Significant architectural history, landscape history, or engineering achievements.
The National Register may also consider a site historic if the property has the potential to aid in archaeological investigation. As such, historic homes tend to be at least older than 50 years. Lastly, integrity is a vital component of classification as a historic home. The National Registry aims to preserve these historic places. As such, the property must closely resemble its appearance and characteristics as it was in the significant historical period. This last requirement is why insurance coverage for a historical home is likely to differ from general homeowner insurance.
Homeowners insurance typically provides coverage against catastrophes such as fires, natural disasters like hail, thunderstorms, hurricanes and lightning, and, in some cases, flooding and vandalism. It is worth taking time to comb through the fingerprint and understanding what may or may not be covered under certain policies. Being underinsured can lead to significant losses when homeowners underestimate the risk of a certain event. Conversely, over-insurance can lead to unnecessarily high premiums.
Some events can result in irreparable damage to property. In order to maintain the integrity of a historic home, the homeowners ought to replace the damaged sections of the property with identical materials and designs. Because the vast majority of historic homes were constructed prior to the development of modern construction methods and materials, restoring or refurbishing historical homes may be costlier than addressing similar damage to modern houses. Plaster walls, solid-wood doors, antique chandeliers, stained glass windows and solid brass fixtures that feature in historic homes generally cost more than their modern counterparts. Contractors may face significant hurdles in procuring comparable materials and reconstructing certain structures to resemble their original state may violate current building codes.
As such, not all insurers are willing to provide coverage for historic houses but there are certain companies that do and some of them specialize in high-value homes. The insurance market for historic homes is relatively minute compared to the wider housing market and determining if you are getting the best value from your insurance provider can be difficult. Insuring a historic home typically costs 20% higher than a standard home of comparable size and characteristics. However, it could be the case that one insurance provider charges higher premiums in recognition of the high value of the home or its classification as historic. Alternatively, another insurance provider could charge a lower rate in acknowledgement of the potentially superior and more robust material used in the construction of a home that has withstood the elements and the test of time. Insurance providers have access to data and information that is out of reach for most individual homeowners and this information asymmetry is a potential pitfall when attempting to acquire home insurance.
A reasonable starting point when looking to insure a historic property would be an interior and exterior inspection. Insurance providers may consider older homes riskier to insure if the true condition of the home is unknown. This is because these older buildings could have compromised structural integrity, faulty wiring or leaks that would present unanticipated costs for an insurance company. An inspection allows a homeowner to have a clearer understanding of the condition the home is in and to take preventative action or implement mitigating measures against potential disasters. This would reduce the uncertainty regarding the potential financial exposure taken on by both the homeowner and the insurer providing coverage. This, in turn, reduces the cost of insurance.
Furthermore, an inspection of the property is an opportunity for the homeowner to estimate the cost of rebuilding or replacing damaged sections of the property. A common error when making insurance coverage decisions is considering the purchase price or the current market value of the property. Because of the prior mentioned unique characteristics of historical homes, these properties are often purchased at a price lower than the overall cost of rebuilding them. As such, the value of the insurance policy should consider replacement costs.
Safety and security measures are significant contributors to the reduction of insurance premiums. A security perimeter and security system would reduce the chance of vandalism and other forms of damage due to criminal activity. Further, a fire detection and suppression system would limit the overall damage sustained by the building in the event of a fire. Installing these systems could be possible without compromising the integrity of the historical home, thus affecting its status. Further, some historical houses have electrical wiring that may be considered risky and outdated. In certain cases, it would be best to rewire the building with modern upgrades.
Finally, selecting both the right insurance provider and the best policy are crucial in obtaining value for premiums. There are several insurance policy providers in different regions. Their affordability often depends on factors such as the markets in which they operate, the size of their client bases, and other company-specific factors. Reliability and the quality of the service provided should be a prime factor in choosing an insurance provider. The best way to save is to shop around and compare not only insurance providers, but the policy coverage options provided. It may not be ideal to obtain a policy that insures against hail, for instance, in a region that does not experience significant hail activity.
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Although there is a lot of information available regarding home insurance online, it can be a challenge to discern useful information from the marketing and promotional material provided by competing insurance providers. PolicyScout experts can help you cut through the confusion and provide you with the home insurance advice and coverage that you need.