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What You Need To Know About Home Insurance For An Older Home

2010-04-06

There is a difference between insuring an older home based on value and based on anticipated repairs needed. When estimating home insurance coverage costs based on home value only, buying an older home can - on paper - appear to offer excellent cost savings. This is why the first step before purchasing an older home should be to have a thorough evaluation regarding estimated home repair insurance needed before making the final purchase decision. Next, the wise home buyer will obtain an estimate of monthly home insurance premiums prior to closing the sale that will take into account not just the appraisal of the home's actual value but the anticipated expense associated with rebuilding the home in the event of a disaster.

So before considering the purchase of an older home, obtain a thorough inspection of the home, structure and systems. Older plumbing, electrical, and HVAC systems are more likely to incur home repair insurance premium hikes due to increased risk of fire or water damage or the need for complete replacement. In addition, evaluate the presence of older home features including plaster, real wood floors, crown and ceiling molding that can be more costly to replace - and to insure. It is also important to research any past history of damage or water claims prior to purchase.

Most states designate home insurance coverage in a series of policies with differing levels of coverage. The HO-8 policy is the one typically offered for older homes, and with this policy only the present worth of the home will be reimbursed in the event of damage or destruction, after deducting the depreciation value. This is why it is critical to evaluate the potential financial outlay to determine if the cost savings of purchasing an older house are worth the possible home insurance costs to restore the home following damage or destruction. Also make sure when gathering and comparing quotes to ensure that the quoted premiums reflect the price at which the home was purchased and not the cost of rebuilding it - in this way, avoid paying higher premiums than what is required to insure an older home.

Finally, when it comes to real estate, location always matters, and in the case of an older home, proximity to the local fire station may have an effect on the cost of home insurance and home repair coverage. If the home is closer to the fire station a reduction in premiums may be offered. Similarly, if the home is constructed of materials that are considered disaster-resistant, the age of the home may not matter as much because the home will be considered at lower risk in the event of a natural disaster.