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Buying a lovely historic home or a classic midwestern house of the fifties offers a sense of character, craftsmanship, and neighborhood history that modern suburbia finds hard to replicate. From beautiful hand-carved crown molding, original oak flooring, plaster walls, and vintage bricks – there’s plenty of aesthetic charm in old homes. But the moment comes to buy home insurance for your dream property, you are often faced with an economic reality – insurance rates for older homes are much higher than those of newly built ones.
However, insurance companies don’t consider the historical and aesthetic value of older properties. Underwriting is all about numbers and probabilities. When viewed actuarially, an older property is a ticking bomb full of property insurance claims. Over time, buildings decay, regulations change, and more risks hide behind drywall. If you’re wondering why your vintage home needs such an elevated premium, read on and discover the main reasons for this.
1. Outdated and Potentially Hazardous Electrical System
One of the primary factors that cause skyrocketing premiums is an electrical system. Older properties, especially homes from the nineteenth and the twentieth century, were initially built to handle very little power load, usually just a couple of bulbs and one kitchen radio. The houses were outfitted with a “knob-and-tube” system, which means each circuit uses one insulated copper conductor in a porcelain tube. As it ages, the protective cloth insulation wears out, turning into fragile flakes and leaving naked copper wire uncovered and in contact with dry wooden structures and insulation.
Likewise, homes from the ’60s and ’70s have aluminum wiring, as copper became scarce and very expensive at that time. However, aluminum expands and contracts dramatically under power, and its connections become loose after some time, posing a serious threat of fires. Contemporary families use lots of power for air conditioning, dishwashers, modern TVs, computers, and other electrical devices that can be connected to a charger. Feeding this power surge to an old system creates a huge fire risk, which can force insurance companies to either refuse to insure your property or ask a lot of additional money.
2. Fragile, Corroded and Deteriorated Plumbing Infrastructure
Water-related problems represent one of the main categories of claims in the whole country. And as we’ve already noted, older homes are statistically more likely to experience problems with their plumbing infrastructure. Most homes that were built in pre-1970 times used galvanized and cast iron pipes for carrying drinking water and sewage. However, these pipes become rusty with time and can start leaking slowly from inside, making water flow weaker and increasing the chances of bursting and flooding. Furthermore, cast iron sewer pipes may crack or collapse due to tree roots growing inside, potentially bringing raw sewage into your home.
Because a pipe leak may take days or even weeks to develop, the chances of hidden damages increase dramatically. Once discovered, such damages are often accompanied by the need to cut away plaster drywall and perform mold remediation and structural repairs, driving the claim cost upwards. Insurance companies take these factors into account and adjust the base premium accordingly.
3. Higher Replacement Cost and Historic Regulations
If an insurer calculates your insurance coverage, they rely solely on RCV – a replacement cost value of your property, or in other words, how much would you have to pay to rebuild your house in case of a total loss. An older house demands much higher replacement cost values than newly built ones as the reconstruction of an old property costs a fortune. While modern houses use inexpensive and mass-produced materials such as pre-manufactured drywall and engineered lumber, a vintage property may require specially skilled craftspeople to install lath-and-plaster walls, custom hardwood crown molding, and solid wooden pocket doors.
In addition, if the property falls into a nationally or locally recognized historic district, you might be obliged by the laws to build your house to exact historic specifications. As such, if you lose a roof to hailstones, you cannot put cheap asphalt shingles but should go with much more expensive split-slate roofs. All these factors influence the replacement cost of your home and affect your insurance premium directly.
4. Aging Roof and Deteriorating Structures
As we mentioned earlier, roof condition plays a crucial part in setting premiums and determining your rate. Roofs are an essential line of protection against adverse conditions, so an older home automatically possesses an older roof, even if its outer layers were replaced over time. However, as your roof gets older, it starts deteriorating, losing strength and integrity. Heavy winter snow loads, extreme heat, and small leaks make roof beams, plywood decking, and other underlying parts decay, sag, or become porous and susceptible to rain.
Another factor that makes roof costly to repair is the presence of double and triple roofing. Years ago, many homeowners tried to save money on roof replacements and simply nailed a new layer of asphalt shingles on the existing layer. Such practice is hazardous, as it allows water to accumulate between the layers and increases weight on the roof structure. Today’s advanced satellites and drones can detect these flaws instantly, and insurers may apply a penalty to your premium and place an actual cash value (ACV) endorsement on your roof, meaning that they won’t provide full coverage in case of any storm losses.
5. Violation of Current Building Code Requirements
Construction practices change all the time as engineers learn new things, invent new materials, and gain new knowledge about weather risks and regional conditions. Older homes were built according to the building codes of those times, so they violate modern safety rules and pose extra dangers in case of an emergency or storm. First of all, an older home lacks proper hurricane clips, so a roof can be easily blown off by powerful winds. Another important feature is different foundation design and construction method – many homes built in 1940s and 1950s had unreinforced foundation made of porous materials like limestone that can be dissolved with time.
In case of any partial damage from natural disasters or a house fire, a local building department will force a contractor to bring all the house structures up to date with modern codes while fixing the damage. This practice causes huge unexpected expenditures and forces homeowners to invest money above what the claim covers, which is why insurance companies apply penalties to your premium to offset the risks.
Frequently Asked Questions
Question: What is four-point inspection, and why do insurance companies demand it for older homes?
Answer: Four-point inspection is a special type of property safety evaluation that examines four major systems of the house – roof, electrical wiring, plumbing infrastructure, and HVAC equipment. Insurers typically require such examination to be performed for all houses that are more than 30 to 40 years old before agreeing to write or renew the policy.
Question: How can I reduce my insurance premium by upgrading my home’s infrastructure?
Answer: Yes, you can significantly reduce your rate by renovating the core utilities of your home. Providing evidence of having updated all major systems including roof, wiring, plumbing infrastructure, and HVAC equipment can help you cut down your insurance cost to the point where they become comparable with those for a new house.
Question: What is a building ordinance or law coverage, and do I need such coverage for my older home?
Answer: Building ordinance coverage is a special type of additional insurance for older houses. It can be attached to the basic coverage as an endorsement and provides additional protection in case of partial loss, covering the expenses necessary to restore structures according to current building codes.
Question: Do insurers charge more money for homes that have plaster walls?
Answer: Yes, they do as it takes more time, effort, and money to reconstruct plastered walls than ordinary modern drywalls. Plastered structures require special skills and labor and increase the replacement cost of your property significantly.
Question: Why do insurers refuse to cover homes with aluminum wiring?
Answer: Most carriers refuse to insure homes that still have aluminum wiring as such installations pose unacceptable safety risks. Unlike copper wiring, aluminum expands and contracts dramatically, making electrical connections unstable and potentially leading to an electrical arc that ignites fire.