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Insurance companies look at many factors when insuring a home. Among those factors, they consider the age and the cost to rebuild the home the most. Insurance companies don’t use a strict formula based on the home’s age to determine the premium, though. The premium they charge each homeowner depends on a variety of factors.
Keep reading to learn what affects an older home’s premium.
Cost to Rebuild
Rebuilding an older home often costs much more than rebuilding a recently built home. The materials used and the architectural details often make the cost to build an older home much more than the cost to build a recent home. The higher cost makes insurance companies increase the premium.
Sometimes the cost to rebuild an older home exceeds its current market value. This happens more often in historic homes with intricate details and materials not readily available today. Insurance companies either have to greatly increase the premiums on these homes to cover the cost of the materials in the face of a total loss or not insure the home at all.
Older Homes Have More Risks
Today’s recently built homes meet today’s safety standards. Older homes, on the other hand, often violate those safety standards, putting the home at risk. A few examples include:
- Fire hazards – Electrical systems have greatly improved through the years, but older homes may still have the original wiring system. The old wiring system could put the home at risk for fire, which may increase the premiums on the home.
- Leaking issues – Old plumbing fixtures can rust and leak water everywhere. This can cause issues throughout the home, putting the insurance company at risk for costly claims.
- Old appliances – Older homes often have the original appliances, especially if they are historical. While they may look beautiful, they can pose serious hazards, including fires and floods, causing insurance companies to increase the premiums.
Insurance companies assess risk – that’s their job. They want to insure homes that have a low likelihood of having claims filed. O course, no one can 100% guarantee that they won’t have a claim, but knowing that a home has faulty wiring, leaking plumbing, or old appliances makes the home even riskier to insure and therefore more expensive.Shop and compare insurance quotes.
Can you Lower the Insurance Premiums on an Older Home?
Insurance premiums for older homes can cost as much as two to three times more than insurance on a newer home, but that doesn’t mean you have to pay the higher prices. There are a few ways you can lower your premiums:
- Update the wiring – Keeping the original wiring may seem nostalgic, but it puts the home at serious risk of fire. Updating the wiring to today’s standards can help lower your premium because it lowers the risk of fire and total loss.
- Update the plumbing – Insurance companies don’t like to see original plumbing in a home. They want plumbing built with today’s materials that reduce the risk of leaking and/or flooding. Updating the plumbing and fixtures can help lower your premiums.
- Take a higher deductible – If you can afford a higher deductible, take it. The more risk you put on yourself in the face of a claim, the less the insurance company charges you. A higher deductible means that you pay part of the claim first before the insurance company has to pitch in and pay the claim.
Depending on the age and condition of your older home, you may have trouble finding insurance for it. Do your research and make as many upgrades to the home as you can. You want insurance companies to see the home as an asset, not a liability waiting to be leveled to the ground by a fire or flood in an instant. Taking the time to make safety upgrades while keeping the historical component of the home can increase your chances of securing lower premiums for decent homeowner’s insurance.Get the right insurance coverage.