A historic home can be a great place to live. Instead of being a blank slate, your home will have a unique personality of its own. There may be local history or even famous historic figures associated with the property, which can be a fun conversation starter. However, taking care of a historic property also comes with a unique set of challenges, which is something that you will need to consider when looking for insurance for your historic home. Take a look at a few important things that will help you choose the right coverage for a historic home.
Have An Appraisal
Choosing the correct amount of coverage for a historic home is important. You don't want to take the risk of underinsuring your home. In a newer home, it's easier to figure out what everything is worth because it will be comparable to other, similar homes. At most, the insurance company might do what's called a drive-by appraisal – a quick evaluation of the outside of the property. However, this is not necessarily adequate for an older, historical home. Replacing something like Queen Anne molding from the late 1800s is not going to be a simple task, and it's not something that an appraiser can guess at from the outside.
Insurance companies that specialize in insuring older and historic homes often offer a complete appraisal service so that the homeowner can insure the home for the correct amount. Alternatively, you can hire an independent appraiser. But you should definitely have your historic home fully appraised so that you can choose the correct coverage amounts for you.
Understand Your Valuation Methods
It's also important to understand the language insurance companies use when they talk about valuation of your property. There are three options when it comes to valuation: Actual Cash Value, Functional Replacement Cost, and Replacement Cost.
Actual Cash Value pays the cost of construction minus the depreciation of the structure and your deductible. For example, if your roof cost $10,000 when it was installed and it's depreciated by $2000 since then, and you have a $500 deductible, your insurance company would only pay $7500 to replace the roof. If the new roof also costs $10,000, you'll have to pay the $2500 that the insurance company is not paying. Actual Cash Value can be useful in some circumstances, particularly on commercial buildings, but it's rarely a good choice for a home, and is almost never a good choice for a historic home.
Functional Replacement Cost is a good choice if you're not concerned about preserving the historic parts of the home permanently. Basically, the insurance company will pay the cost of replacing a damaged part of the home with modern materials and styles, but not the cost of restoring that part of the home to its previous state. That means ornamental plaster is liable to be replaced with plywood or wallboard. It's up to you to decide if that's acceptable.
Replacement Value is the valuation you want if you prefer that any damaged parts of the home be restored to their original condition. A Replacement Value policy may cost you more than either a Functional Replacement Value policy or an Actual Cash Value policy, but it will ensure that you can, as much as possible, maintain the features that make your historic home unique.
Don't Forget Ordinance and Law Coverage
Ordinance and law coverage is included in traditional home insurance policies, but many homeowners don't know much about it. This type of coverage is intended to cover situations where the law requires demolishing an undamaged part of a home and rebuilding it to current local building codes. This usually occurs when a building has been damaged to a certain extent – 50% in most places.
The amount of ordinance and law coverage included in typical home insurance policies is not likely to be sufficient for historic homes, which may require extensive upgrades to meet codes. Costs may also be higher when builders are faced with the challenge of meeting new codes while maintaining the historic appearance of the building. You'll need a policy that includes increased ordinance and law coverage so that you can cover the costs of upgrading the property after it's been damaged.
When buying a historic home, your best bet is to work with an insurance company that specializes in older and historic homes and understands your specific needs. That way, you can be certain that your home will be protected when you need it the most. For more information, contact an insurance company such as Hamsher Insurance.
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