Best homeowners insurance for older homes

Our top 5 picks for best home insurance for older homes

We’ve selected our top five insurers for older homes, and you’ve likely heard of all of them. However, these insurers are among the best choices for older homes. Keep in mind that USAA only works with active-duty military, their family members and veterans.

• American Family Insurance
• USAA
• Liberty Mutual
• Progressive
• Farmers

Why are older homes more expensive to insure?

There are many reasons older homes are more expensive to insure, mostly due to added risks and higher potential costs for home insurance companies. For instance, older homes often have decades-old electrical, plumbing or heating systems. Because these systems are old, they can be more prone to failure, and the risks of fire and water damage can be higher.

Another consequence of outdated systems in older homes is they often aren’t up to code. As a result, if the home needs any major repairs, it will need to be updated to meet building codes, increasing costs.

Building materials can also be a problem. In many cases, old homes have building materials that are no longer used, such asbestos or lead pipes. Or, they may have intricate details that would be costly to replace by today’s standards. Examples might include plaster walls, ornate woodwork or custom woodwork.

What type of insurance should you get for older homes?

When purchasing an older home, consider standard coverage and policies designed to meet your home’s unique needs and risks. Standard coverage typically provides dwelling, personal property, liability and additional living expenses.

The home's structure is covered with standard coverage, as are your possessions inside. Liability coverage compensates you if someone is injured on your property. Additional living expenses are those you might incur if your home becomes uninhabitable due to a covered loss. However, older homes will often benefit from additional coverages like hidden water damage and roof damage.

The most common type of home insurance is called an HO-3 homeowners insurance policy. In many cases, this is the standard homeowners policy that covers the things mentioned earlier, such as coverage for the structure, personal belongings, liability and additional living expenses. Your older home may qualify for an HO-3 policy; if not, you may need to make a few updates, like fixing your plumbing system or patching up your roof.

If you can’t qualify for an HO-3 policy, you may need an HO-8 policy, also known as modified coverage. The latter is meant for older homes that can’t get an HO-3 policy due to their age, condition or historical significance. Modified coverage usually covers the full replacement cost, which is the actual cash value minus depreciation.

HO-8 policies typically provide less coverage than HO-3 policies. For instance, they usually cover the home’s actual cash value (ACV), not the replacement cost. ACV considers depreciation, so the payout is based on the property's current value, not the cost to replace it with all new materials.

Additional coverage options for older homes

Older homes can have many risks you wouldn’t find with newer homes, often making them more expensive to repair. Consider these coverages to protect yourself against the added cost of repairing an older home.

Extended replacement coverage

With this type of coverage, your dwelling coverage increases by 25% to 50% if you hit the limit. This can happen due to increases in construction costs or code upgrades. In some cases, you might be able to get guaranteed replacement cost coverage. This type of coverage reimburses you for the entire cost of repairs, even if they are higher than the 25% to 50% range.

Water backup coverage

Unfortunately, older homes can be more prone to sewer and drain backups. This can happen in older homes because they often have outdated plumbing systems. Of course, this can lead to water damage, which can be costly. These coverages help protect you in this situation.

Service line coverage

This coverage pays for any damage to utility lines that run to your home. You may not realize it, but you are responsible for paying for this damage. With an older home, these lines are often aging and may need to be repaired or replaced. That can be very costly without insurance. Fortunately, these coverages will pay for it.

Scheduled personal property coverage

This coverage is an add-on to standard home insurance, providing more coverage for valuable items. It is designed to protect valuable items beyond their standard policy limits. It may apply to jewelry, art, antiques and collectibles. These items are typically insured for their appraised value, not including depreciation.

Roof replacement coverage

Older homes commonly have older roofs, which can be more susceptible to wear and tear. Roof replacement coverage pays for repairing or replacing an older roof. Keep in mind that some insurers may only pay for the ACV of the roof, not the replacement cost. If this is the case, you may need additional coverage so you won’t have to pay out of pocket.

Bottom line

Insuring an older home can be more expensive due to outdated heating, plumbing or electrical systems. Remember that older homes often need additional coverage, such as extended replacement and water backup coverage. Extended replacement coverage increases dwelling coverage by approximately 10% to 50% of the cost to rebuild your home.

To find the right coverage for your older home, get quotes from several providers and compare rates and coverage options.