The Historic House, Insurance Illuminations

By by Kevin Daly

If you're assuming that all homeowner's policies are the same, you could be setting yourself up for a major disappointment if you need to file a claim. When shopping for insurance for your historic house does "full replacement coverage" include actual replication of the significant historic details such as moldings and other woodwork elements? An example of a policy loophole might reveal an insurer only agreeing to pay for the replacement of an 18th century window with a modern premanufactured window of similar size and appearance. This may be dissapointing if you wish to replicate the lost historic element exactly and the insurer will not cover it, even under a replacement policy.

Purchasing insurance for your historic or antique home is easy. There are more than enough insurance companies around who are looking for customers. Purchasing the right insurance for your antique home, however, is a whole different story. If you're assuming that all homeowner's policies are the same, you could be setting yourself up for a major disappointment if you need to file a claim. If your home is completely destroyed, disappointment could turn to despair. To avoid a financial catastrophe, you should take some time to learn about some of the most important coverages in your homeowner's insurance. In this article, we'll get you started by looking at some of the features of homeowner's policies and how various companies will respond to the needs of owners of antique and historic homes.

Extended Replacement Cost

This coverage can be found in most homeowner's policies, but remember the cliche; make sure you read the fine print. Extended replacement cost coverage guarantees that your insurance company will pay the reasonable cost to rebuild your home after a covered loss, even if the cost is more than your coverage amount. For example, if your house is insured for $300,000 and the actual cost to rebuild it is $340,000, then your insurance company would pay $340,000. In the last two years, however, some of the largest insurance companies have taken away this valuable coverage from their policyholders. In many states, companies have capped this coverage at 120% of the coverage amount. For example, if your house is insured for $300,000 and the actual cost to rebuild it is $450,000, a policy with a 120% cap would only pay $360,000, leaving the policy holder with $90,000 in additional rebuilding expenses. If the customer doesn't select an adequate amount of coverage, the result could be a financial shortfall at the time of a total loss. This last point is quite relevant for owners of antique homes. Antique and older homes are often times purchased for values significantly lower than the cost to actually rebuild them. After the purchase, many homeowners mistakenly insure their home for the purchase price or the home's market value. Since antique and historic homes often contain features that are not easily or inexpensively replicated in this day and age, such as plaster walls, wide pine wood floors, and extensive interior detailing, the actual cost to rebuild the home can greatly exceed the purchase price or market value.

Home Appraisals and Selecting the Right Amount of Coverage

Of course, the next question an owner of an antique home might ask is: "Well, how am I supposed to know how much it would cost to rebuild my house?" This is another instance where you cannot depend on most major insurance companies. Ironically, the companies that have capped their extended replacement cost coverage are also those that leave it up to the customer to determine an accurate replacement cost. If you choose an inadequate amount of coverage and your home is completely destroyed, a typical homeowner's policy will only pay up to 120% of your coverage amount. You will need to make up the difference between the payment amount and the actual cost to rebuild.

To ensure peace of mind, owners of antique homes may best be served by insuring with a carrier that offers a home appraisal service. Although some carriers may provide an exterior (or "drive-by") appraisal, these valuations may not be adequate for older homes. Because the appraiser does not review the interior of the home, he or she cannot properly assess the value of numerous interior features, like plaster, detailing, etc. Even with an exterior appraisal, you could wind up with insufficient coverage. Fortunately, there are insurance carriers that offer appraisal services that meet the needs of owners of antique homes.

lCompanies that specialize in high-end and antique homes employ highly trained in-house appraisers to evaluate the replacement cost of unique and historic homes. These appraisers conduct thorough interior and exterior inspections and carefully record the construction details of each home. Supplied with superior information, these high-end companies can provide replacement cost estimates with confidence, which then allows them to offer extended replacement cost coverage without limitations or caps. The result is peace of mind for the homeowner, as the burden of accurately determining the value of the home is shifted to the company, and the homeowner is assured that the home will be rebuilt, regardless of the coverage amount.

As an additional service, some high-end companies provide copies of their home appraisals in attractive, bound booklets which homeowners can proudly display on a coffee table and use as a reference in the event of a loss. These appraisals contain several photographs of the home, a written narrative describing the history of the home, safety tips, and fire protection and security recommendations.

Rebuilding to Code

(Ordinance and Law) Coverage
A specific coverage that is virtually essential for owners of antique and older homes is "rebuilding to code" coverage. Also known as "ordinance or law", rebuilding to code coverage helps to protect against the cost of conforming to any building codes that regulate the repair and/or rebuilding of your home after a loss. Many towns and counties enforce building codes that affect various aspects of home building and repair, such as electrical wiring, plumbing systems, and fire codes. For example, if you need to repair or rebuild your antique home after a loss, local building codes may require you to rewire your entire electrical system, or even widen stairways and hallways to improve fire safety. If your insurance policy does not include rebuilding to code coverage, you will have to pay for these upgrades and changes yourself. Some carriers do not offer this coverage, while others only offer it by endorsement, but high-end carriers are likely to include it automatically. This is another instance where owners of antique homes can either double-check the fine print on their policies or purchase premium insurance that automatically includes rebuilding to code coverage on a replacement cost basis. If you choose a standard insurance policy and can purchase rebuilding to code coverage by endorsement, make sure that the endorsement includes coverage on a replacement cost basis, for 100% of the coverage amount.

For Additional Information
Since many antique homeowners devote so much of their time, money and hard work into their residences, it would seem logical to invest a proportionate amount of time into obtaining the best possible protection for their homes. Unfortunately, many people just assume that all homeowner's insurance policies are alike, and coverage’s are the same from policy to policy. Nothing could be further from the truth. Shop around, not for the cheapest price you can find, but for the best protection for your older home.
For more information on historic house insurance issues contact Kevin Daly at Personal Lines Insurance Brokerage in Boston, MA. Kevin has years of experience in designing personal insurance programs for individuals with specialized insurance needs.

Editors Note: When shopping for insurance, ask the insurer if his "full replacement coverage" includes actual replication of the significant historic details such as moldings and other woodwork elements. An example of a policy loophole might reveal an insurer only agreeing to pay for the replacement of an 18th century window with a modern premanufactured window of similar size and appearance. This may be dissapointing if you wish to replicate the lost historic element exactly and the insurer will not cover it, even under a replacement policy.

Kevin Daly is a broker at Personal Lines Insurance Brokerage in Boston, MA. Kevin has years of experience in designing personal insurance programs for individuals with specialized insurance needs.

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