Older homes are treated differently by insurance companies than modern homes, and that is impacted by how well the home is maintained. The higher your home's value, the more you pay in insurance. Here's what you should know about homeowners insurance for older homes.
In general, the older your home gets, the higher your insurance costs will be. A home over 25 years old can have nearly twice the premium of a new home. Two of the reasons you'll pay more for insurance as your home ages are wear and tear from weather and safety issues. Homes built a hundred years ago didn't have the safety codes that are in place today. There are fire risks from old wiring that should be periodically inspected. Another reason for higher premiums as the home ages is that the cost of repair and replacement material is more expensive for older designs.
Mortgage lenders usually require borrowers of home loans to carry homeowners insurance as protection for the asset they own until you pay off the mortgage. Your home exists as collateral for the lender while the loan is in effect. Another type of funding for which you may need homeowners insurance is a home improvement loan.
Yes, you may need special coverage for an older home if it doesn't meet current building codes. You can add an "ordinance or law" endorsement to your homeowners policy to gain sufficient coverage. An HO-8 policy is special coverage for older homes in which the cost to replace materials is less than the home's market value. The coverage pays reimbursements based on actual cash value.
There are certain ways you can control your insurance costs, starting with choosing a home in a low-crime area. Homes in flood plains also have high risks, which is why flood insurance is more expensive in such areas. Another factor you can control is your deductible, as raising it lowers your monthly premium. Upgrading your home with weatherization techniques can lower both your energy and insurance bills.
Insurance companies in various states are allowed to review your credit-based insurance score. Different from your credit score, it scores the likelihood of you filing a claim based on your claim history and other factors.