Insuring older homes can be a challenge
Older homes that need some work can be a great investment but they pose a problem when it comes time to buy insurance. Many insurance companies are reluctant to insure an old home that has not been fully updated. However there are a few tips and tricks that will help you obtain the coverage you need. The solution to this insurance problem lies in choosing the right insurance company and the right type of policy: one that is designed to meet the coverage needs of an old home.
Instructions
1. Determine whether you need a vacant policy or a standard home or rental policy. If you are living in a home while you work on it or conduct a remodeling project, you can likely qualify for a homeowners policy. If the home will be vacant during renovation you will require a vacant dwelling policy. Vacant dwelling policies are much more expensive than homeowners policies because there is a higher risk of fire and vandalism when a home is vacant.
2. Determine whether your home will be occupied by yourself or held for rent. If it is to be a rental, then you can choose from several types of rental property insurance. The three most common rental dwelling policies are referred to as basic, broad, and special policies or, DP1, DP2, and DP3. The DP1, or basic, policy offers the most limited coverage but also employs the loosest underwriting standards. If your rental home is in poor condition you may still be able to find coverage here. The DP2 and DP3 are each progressively broader in coverage scope and will have tighter underwriting standards. In short, you may need to start with a DP1 and then work your way up to a DP3 as the home is gradually improved.
3. Get your home into insurance shape. Assuming that you are going to try to qualify for a homeowners policy, you will need to know the three key items all homeowners insurers look at when determining whether an older home can qualify for coverage. Insurers want to know that your home has new wiring and circuit breakers (not fuses); a newer roof (replaced within the last fifteen to twenty years); and updated plumbing. Lead or galvanized pipes are generally frowned upon by insurers. If you are renovating a home, address these three issues first. They will make your home more desirable to insurers. Some companies will even allow you into their standard homeowners program without updates as long as you agree to make improvements in these areas within a specified period of time.
4. Address liability issues. Another area that home insurance companies evaluate is the risk for liability claims. Any elevated porches must have a railing. You will also want to have a handrail at any point where you have three or more steps. Be sure the property is free of dilapidated outbuildings and any injury hazards such as abandoned wells or uneven pavement. if you have a pool or a trampoline, mention it to the agent before a quote is obtained.
5. Stage your home. Some companies have an underwriter review photos of every home that is submitted for a policy. Some insurers rely on their agents to inspect the home. Either way, you will want to put your best foot forward when presenting your home for a standard homeowners policy. Walk around your home and look at it through the eyes of a visitor. Clear loose brush and trim shrubs that are growing close to the home. Replace any missing or damaged gutters. Apply a fresh coat of paint where needed. Mend broken rails and cracked glass. In some cases, a Saturday afternoon with a paintbrush or power washer can transform your older home from a dump to a dwelling that is acceptable to any insurance company.
6. Examine all coverage options. Once you have settled on a carrier that will offer coverage for your home, review the policy forms available. A standard HO-3, HO-5, or equivalent policy, will pay the replacement cost for the expenses of repairing or rebuilding your older home as it is. Bear in mind, however, that old homes have unique features. Your home may have 9 foot ceilings, large windows and 6 inch thick custom wood trim. These features will all be taken into account by the agent in determining a coverage limit and you may find yourself insuring your home for far more than its market value. If you are not concerned with maintaining coverage to replace the vintage features of your home, then you may want to consider a "functional replacement cost" endorsement. This method of coverage will allow you to insure the home for a lower limit, and thus a lower price, and have all claims adjusted based upon the cost to replace or rebuild using modern day materials.
Tags: your home, homeowners policy, older home, your home, Determine whether
