Understanding Insurance Policies

Key Considerations When Insuring An Historic Home

15 April 2016

Samantha Reynolds

If disaster strikes, repairing the damage to an historic home can be a costly undertaking. Historic homes generally boast unique design concepts both on the exterior and interior of the home. Building materials, such as wide plank floors, carved wainscoting, stone facades, and ornate stained wood moldings, aren't easy to come by, but when they are the materials are expensive.

Calculating the cost of restoring an historic home to its former character can be a difficult task, especially when considering the craftsmanship and building materials that originally went into the home. Therefore, it's important to take a number of key issues into account when insuring the home.

1. Historic register listing. If your home is located in an historic district, having it listed on an historic registry can help you prove an insurance claim if you ever need to file one. However, an historic association has specific requirements you must meet in maintaining the home's authentic characteristics, particularly if you initially received a grant from the society to help cover the cost of restoring the home.

If the property is later damaged by an insurable event, the historical society may have a say in how you spend the insurance money. Since the historical society will want the home restored to its original condition, if you don't receive enough money from your insurance company to make all the needed repairs, the society could remove your home from the registry if it no longer meets the requirements.

2. Guaranteed replacement cost coverage. Although this type of coverage isn't always easy to get for historic homes, this policy add-on gives you the extra coverage you may need if the limits of your standard policy won't cover all the repair or rebuilding costs. But while a guaranteed replacement cost policy will pay to put your home back to its former condition no matter what the limits stated in your policy, it won't pay for the cost of upgrades required by your local building codes.

3. Extended replacement cost coverage. This add-on to your standard policy is another option that gives you coverage in addition to your policy limits. Although it won't provide as much coverage as a guaranteed replacement cost policy, it provides coverage above your standard policy limits – usually a specified percentage of your standard policy's coverage. A possible drawback is that not all insurers provide this coverage for older homes built prior to a particular year.

4. Ordinance or law coverage endorsement. This coverage pays for the cost of repairs you are required to make to meet local building codes. When it comes to repairing or reconstructing an historic property, you will need to comply with current structural, electrical, and plumbing codes, which can substantially increase the cost of the repairs. Since standard home insurance policies generally exclude paying for costs that bring your home up to local codes, you may need to purchase law and ordinance coverage to have sufficient coverage in the event that your historic home is seriously damaged or destroyed.

For more information and options, talk with a homeowners insurance company, such as Harris Insurance Services.

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