If you’re looking to buy an old home you may be stuck in a common problem of finding homeowners insurance for your property. When most insurance companies hear about a home that is more than 40-years-old they often prefer to pass, and when you tell them your house is 100-years-old they run screaming and tell all their insurance friends not to return your calls.
If you are a cash buyer then you can go without insurance (if you dare!), but if you have a mortgage like the rest of us then you are required to have insurance in place before you can even purchase the house. So what are you to do?
As a historic home contractor and owner of old houses I have developed a few workarounds to help you find an insurance company and get that old house you so desperately want. These tricks will not work on every property and for every insurer, but if you follow these you can find homeowner’s insurance for an old house.
1. Use an Insurance Broker
Insurance companies are risk averse. It’s just a fact of life. Some view certain things as deal breakers where others are more flexible on a particular issue. If you are buying an old house you can’t just call up your local homeowner’s insurance company and ask for a quote.
You’ve got to be a savvy buyer and shop that policy around to multiple insurers. You’ll get a lot of ”No’s” and a lot of sky high premiums, but you will usually be able to find a couple options willing to partner with you.
Using a insurance broker who can shop your policy to multiple companies at the same time is invaluable, and you don’t have to pay the broker anything either. They are paid a commission by the insurance company not you. So go find a quality broker who is familiar with insuring old houses and watch them work their magic.
2. Consider an HO8 Policy
Most homeowner’s insurance policies are classified as HO3 which means they cover almost anything that goes wrong with your home. Insurance companies don’t like to issue HO3 policies for historic homes because there are so many unknowns and things that can wrong. The insurers are rightly concerned they’ll be on the hook for things like an $8,000 stained glass window that’s broken or asbestos abatement.
With an HO8 policy the coverage is spelled out specifically and anything not mentioned is not covered which protects the insurance company and brings down costs to you. Sure your coverage isn’t as good, but at least you get coverage. And once you make a few repairs and bring some of the biggest items up to snuff then you can change to a HO3 policy with better coverage.
According to SimplyInsurance.com there are a couple important things that are not covered by an HO8 policy that you should keep in mind. In my personal experience I have found this to be accurate as well.
Water Damage – No water damage of any kind is usually included in a basic HO8 home insurance policy. You might be able to add coverage to your policy for an additional premium.
Falling Objects – There isn’t any coverage for falling objects unless you can prove the objects fell on your home due to one of the ten covered perils that are listed in the policy.
3. Replace the Roof
In the last few years insurance companies have become obsessed with the age of a roof on a house. Things like wood shingle roofs, metal roofs over 40-years-old, and asphalt shingle roofs over 10-years-old seem to be a deal breaker for insurance companies.
If you are looking to get insurance for an old house with an older roof what can you do? There are a couple options.
- Ask the sellers to replace the roof and add the cost to the selling price. As long as it’s done before closing the insurance company will usually cover the house.
- Purchase an HO8 policy until you are able to replace the roof and then upgrade to an HO3 policy for better coverage.
- Keep shopping until you find an insurer willing to take a chance on your house with that older roof.
All of these have worked for me in the past. Of course, if your inspection reveals that the roof is past it’s useful life then the seller will have trouble selling to anyone other than a cash buyer because no insurance company will insure a home with a failed roof.
4. Get a FAIR Insurance Plan
For high-risk homes which includes things like historic homes and homes in areas prone to extreme weather like hurricanes there is often what is called a Fair Access to Insurance Requirements (FAIR) insurance plan run by your state.
This insurance is designed to cover homes that would otherwise be uninsurable by traditional insurance companies due to the high risks they pose. The high risks can include location (coastal or similar risk), condition (asbestos, substandard wiring or plumbing, etc.), or simply age.
FAIR insurance plans are available in 32 states currently. The costs are significantly more than traditional insurance, but at least there is an option to get the insurance you need.
FAIR plans are best used to get into an old house for the first year or two while you make repairs and upgrades that will allow your old house to qualify for regular insurance once they are complete.
States with a FAIR Insurance Plan
- New Jersey
- New Mexico
- New York
- Rhode Island
- South Carolina
- Washington D.C.
- West Virginia
5. Get Builder’s Risk Insurance
You’ve tried everything and you still can’t find insurance for an old house you want to purchase. There is one more trick up my sleeve that can save the deal and that is Builder’s Risk insurance. This option really only works if you plan to do a major renovation prior to occupying the property.
Builder’s Risk insurance can be used to insure a property while it is being renovated and while the coverage isn’t as thorough as traditional homeowner’s insurance it can cover the necessities while you get the house into shape.
Typically, this only works if you are a cash buyer or you are working with a hard money lender while the renovations occur. A lot of home flippers use this kind of insurance and my friend Keith Ori of Zombie House Flipping fame turned me onto it. Once the renovation is complete you can take out a traditional mortgage and easily get your homeowner’s insurance as long as you made appropriate updates to the home that will satisfy the insurers.
If you dream of living in an old house I can tell you it’s worth it, but you will have to jump through some hoops. I’m hopeful that this post will help you get insurance for an old house with a little less trouble. Now go find that beautiful, unique, historic home you’ve been dreaming of!
Founder & Editor-in-Chief
I love old houses, working with my hands, and teaching others the excitment of doing it yourself! Everything is teachable if you only give it the chance.