Older homes often have charm and potential, but their distinctive features and architectural details can make them more challenging to insure. Potentially outdated plumbing and electrical systems can have the same effect when it comes to purchasing coverage.
In some cases, a standard home insurance policy can provide the required coverage, but in others, it may not fully cover the risks associated with older structures, which can be more expensive and difficult to rebuild. In those cases, you may need an HO-8 policy specifically suited for older homes.
Understanding why older homes cost more to insure and what coverage options are available can help you choose the best policy for your home.
Why is home insurance more expensive for older homes?
Older homes are generally more expensive to insure than their newer counterparts. Though every property has its own unique insurance profile, there are a few common reasons you may pay more for coverage if your home is 40 years or older.
Age
As homes age, they typically require more upkeep. From worn-out electrical systems to outdated plumbing, older homes generally present a greater risk to insurers. Dated systems and older components, like a 20-year-old roof, can increase the likelihood of a claim. They can also make repairs more expensive after a covered loss.
Replacement costs for outdated or rare materials
Older homes are often built with materials that may be hard to find in today's markets or are handcrafted. Likewise, securing and paying for special materials, like masonry or antique finishes, can present replacement challenges.
The insurance company will consider these costs when calculating premiums, as replacing these unique elements can be pricey and may require specialized work.
Higher risk of damage
As homes age, they become more vulnerable to the effects of weather, wear and tear, and general structural degradation.
For instance, the roof is often the first line of defense against the elements, but older roofs are more prone to leaks or even collapse after a severe storm.
Similarly, other structural elements, such as the foundation or load-bearing walls, may weaken over time and may no longer provide the same level of protection as they once did. Further, since older homes may not meet current building codes or standards, they may be at a higher risk of damage after hurricanes, wildfires, or flooding.
Tip: If you have an older home, ask your insurer about ordinance or law coverage. Commonly included as a policy endorsement, this insurance helps cover the cost of bringing your property up to code after a covered loss.
Types of home insurance policies for older homes
Choosing the right insurance policy for older homes is crucial to ensure you have the right property protection, especially since some of these homes are considered high-risk.
HO-3 Policy
Depending on the age and construction of your home, you may be eligible for a standard homeowners insurance policy, or an HO-3. This type of policy offers open-peril coverage, meaning your insurer will cover damage for all perils, or issues, except those explicitly excluded from coverage. For instance, flood and water backup damage are generally excluded from coverage.
HO-3 policies often offer replacement cost coverage for the structure of your home. In this case, if a covered peril damages your home, your insurer will issue a claims payout based on the current cost of labor and materials (up to your policy limit).
However, since older homes represent an increased risk to insurers, they may not always qualify for an HO-3 policy.
HO-8 Policy
HO-8 policies are specifically designed for older houses and historic homes, particularly those that may not meet the criteria for standard homeowners insurance.
Unlike a standard homeowners insurance policy, an HO-8 policy offers named-peril coverage, meaning only issues specifically named in your policy are covered.
These policies provide actual cash value (ACV) coverage, rather than replacement cost coverage. That means insurers base claim payouts on the depreciated value of the property, not current costs.
Other coverage options
Depending on your insurer, property, and location, you may be able to enhance your older home insurance policy with one or more of these endorsements:
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Extended replacement cost coverage. This extends your dwelling coverage limit, often by as much as 25%, helping you cover repairs that would otherwise exceed your maximum claim payout.
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Ordinance or law coverage. If a covered peril damages your home and you discover the affected property doesn't meet local building codes, this endorsement can cover the cost of bringing it up to modern standards.
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Water backup coverage. Homeowners insurance typically does not cover water damage resulting from backed-up sewers or sump pump malfunctions. This endorsement extends coverage to incidents of this nature.
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Service line coverage. This type of coverage can help pay for the repair or replacement of damaged service lines, including those for sewer, water, gas, or electrical lines.
How much does insurance for older homes cost?
If you have an older home, you’ll likely see higher premiums than you would for a newer construction. However, how much more you'll pay will depend on several factors, including:
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Coverage type and amount. The more coverage you need, the higher your premium. Likewise, if you choose to add coverages to your policy, you’ll generally see a higher premium.
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Location. Home insurance premiums are higher in certain areas, particularly those at a higher risk of damage or loss from fire, wind, flooding, or theft. Homes further away from emergency services may also be subject to higher premiums.
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Deductible. Lower deductibles generally lead to higher premiums, while higher deductibles yield lower premiums. However, keep in mind that high deductibles mean higher out-of-pocket expenses after a claim.
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Your insurance claims history. A history of frequent claims can result in higher premiums. On the other hand, a clean record may lower premiums or qualify you for a claims-free discount.
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The property's claims history. Insurers also consider the claim history of the property. If the house has a history of claims, you may see a higher premium, even if you weren’t living there when those claims were filed.
Learn more: What affects home insurance premiums?
How to save on home insurance for older homes
To effectively save on home insurance for older homes, consider the following strategies:
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Make home improvements. Investing in upgrades such as modern plumbing, electrical systems, and roofing can help mitigate the risks associated with older homes. Insurers often offer discounts for homes that meet current safety standards.
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Work on your credit score. In states where insurers can use your credit score to determine rates, a better score can lead to lower premiums. Make timely payments, reduce debt, and check your credit report for errors to boost your score.
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Shop around. Insurance rates can vary — sometimes significantly — from one insurer to another. Get at least three different quotes before selecting an insurance company.
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Look for discounts. Most insurers offer at least a handful of discounts that can help lower rates. Common discounts include ones for being a loyal customer, opting for automatic payments, or paying your premium in full. Ask your insurer about available discounts.
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Bundle home insurance. Many insurers provide discounts when you bundle home insurance with other policies, such as life or auto insurance. This can lead to significant savings.