Old-House Insurance Policies with the Right Stuff

By Catherine Siskos

	Special insurance policies will cover historic houses so that they can be fully restored should disaster strike. Photo Courtesy of Matthew Jonas/The News Journal

Consider this recipe for sticker shock. Start with a historic house, which poses special challenges to rebuild in the event of a catastrophe. Throw in post-Hurricane Katrina construction costs that are up 25% and skittish insurers capping coverage amounts in coastal states, and the result is too many old-house owners who are underinsured for the next disaster, whether a fire, storm, or leaking upstairs toilet.

With its high-quality materials, craftsmanship, and period details, even a modest historic home can cost about $880 per square foot to rebuild exactly as it was, or $1.3 million for a 1,500-square-foot house, says Jim Fiske, vice president of marketing for Chubb Personal Insurance. A standard homeownerÕs policy will only rebuild an old house using modern materials. ÒMost insurers want to give you Pergo and drywall instead of hardwood and plaster,Ó says Brian Phoebus, program director of National Trust Insurance Services, an independent insurance agency specializing in historic properties. In his view, only three national companiesÑAIG, Chubb, and FiremanÕs FundÑsell policies that meet the special needs of old-house owners.

These high-end policies, which are sold only through insurance brokers and also apply to nonhistoric homes, have several advantages over standard homeownerÕs insurance. They guarantee to rebuild the house using original materials (or the best possible reproductions if originals canÕt be found) even if that cost exceeds the policyÕs limit. Chubb, for instance, recently paid $3.5 million to rebuild a historic home in New York even though the amount was three times more than what the house was insured for. Because many jurisdictions require that the entire house be brought up to code, even when only a portion of it needs rebuilding, there is also built-in protection to cover the cost of those upgrades as well. For losses exceeding $50,000, the policies waive the deductible. Best of all, if your old house canÕt be reproduced or youÕre simply unwilling to rebuild, the insurer will give you the cash value of the policy so that you can build or buy elsewhere. As with any homeownerÕs policy, it doesnÕt include flood insurance, which you can only purchase through the federal governmentÕs National Flood Insurance Program.

Of course, this superior coverage doesnÕt come cheap; the premiums generally run 20% to 40% higher than a standard policy, but there are ways to keep costs down, for instance, by choosing the highest deductible you can affordÑ$5,000 or even $7,500. And you do get brownie points for any improvements that make the house safer, such as adding an alarm system or rewiring the home. Chubb, for instance, awards credits of up to 15% that apply toward the premium. As those systems age, the value of the credit drops so that eventually, youÕll pay the premiumÕs full cost. Sticker shock though that may be, at least youÕll rest easier knowing no more financial surprises lie in wait should disaster strike.

Start a discussion on this article in our old house forum!

Subscribe to our email newsletter!