Older homes attract buyers due to their prime locations and sense of character. However, they also come with unique implications that can be more costly than modern houses. Here are some of the main things to look out for if you’re considering purchasing a home on the older side.
Lower Availability of Insurance Companies
Unfortunately, older homes can be a riskier bet to insure. Some companies may refuse to insure your home if it is too old. Homeowners whose house was built prior to 1900 may find that they have fewer insurance companies willing to consider them. Most insurance companies will not have underwriting restrictions as long as your house was built after 1900. If your home is older, it doesn’t mean that you won’t be able to get insurance coverage but your options will be more limited.
Costs of an Older Home Not Covered by Home Insurance
Since insurance is meant for situations that are sudden and accidental, anything that happens over time, such as normal wear and tear, is not covered. This could include anything from termites, rot, mold--issues that arise when a home has not been properly managed for some years. Older homes are at a higher risk for problems like these, and the damage would need to be paid for out of pocket. Homeowners insurance will not cover any damage…or resulting damage if the proximate cause of the problem was wear and tear.
Implications of an Older Roof
Older roofs also prove to be of higher risk for home insurance companies. In fact, a leaky roof is one of the top reasons a company will reject to insure your home. If your roof is over 20 years old, you will find that many insurance companies will not be willing to provide coverage for your home. For the companies that are willing to provide coverage, you may find that they are only willing to insure your roof on an Actual Cash Value basis which means that they will deduct depreciate from your actual loss. This means that if your roof had a 25 year life expectancy and it has to be replaced after 20 years, the insurance company would only pay for 20% of the replacement value. If you start with your homeowners insurance company prior to your roof being 20 years old, they will not put this restriction on your policy and you would be able to get full replacement value in the event of a loss.
The Need for Increased Ordinance or Law Coverage
Ordinance or Law coverage exists to cover costs of repairs and construction on your home if they are enforced by an ordinance or law based on a city’s building codes. For most policies, this is 10% of your dwelling coverage, which protects the homeowner in the event of a physical hazard. For older homes, this percentage needs to be much higher.
Let’s say you purchase a home built in the early part of the 1900s and in the present day that home catches fire. When looking into the damage, you may find that building codes have changed in the last thirty years, which could mean required upgrades throughout the house that might exceed your budget under a standard policy.
To prevent this, you’ll need an ordinance and law endorsement. Most policy will come with 10% of the dwelling amount as additional coverage. However for older homes, you should seriously consider increasing that amount. Many ‘standard’ policies will allow you to increaser the Ordinance or Law coverage to somewhere between 20% and 50% of the dwelling. Some ‘premium’ policies may allow 100% additional coverage.
This type of coverage comes in handy in a lot of ways. For example, let’s say only one room in your house catches fire. Because of old wiring in the home, all electricity in the entire home will need to be replaced. Typically, insurance would only cover the damage for the room in which the accident took place. But if required by ordinance or law, such as your city’s building code, your insurance company will cover electrical repairs for the whole house.
In short, buying an older home may pose additional problems when securing homeowners insurance. To be safe, make sure to fully assess the condition of the house and factor in renovation costs before purchasing a home like this and contact your local independent agent to secure homeowners insurance on Long Island.