Lose your head buying older home? Look at insurance rate !
Upgrades save you money
Yes, buying an older house might be less expensive but if you don’t carry out certain upgrades, the insurance cost will make your investment not worth it. You can try and lower the insurance rates for an older house by installing or upgrading smoke alarms, CO2 detectors, smart locks and other safety equipment. These kinds of upgrades to an older house could save you money on your annual homeowner’s insurance premiums.
So go ahead and buy that fixer upper! As long as it has good bones, you should be covered.
To save on insurance rates, you will need to know the factors, including the risks, that insurance companies evaluate when deciding the cost of home insurance.
Home insurance is a type of property insurance which covers losses and damages that occur upon your private residence.
A typical home insurance plan covers the following areas and items:
- Liability accidents
- Personal belongings
- Jewelry (restrictions might apply)
- Artwork (restrictions might apply)
However, it excludes:
- Insect infestation damage
- Rust of pipes/metal structures
- Damage caused by small rodents/birds
- Mold that generates due to negligence/lack of maintenance
- Common depreciation and tears of objects/structures
Risky Bets Increase Premiums
Insurance premiums refer to an amount of money that businesses and individuals remit to the insurance companies as part of their insurance policyobligations. The age of the home does matter with regards to determining this price. The below reasons highlight and explain why this is the case:
Older houses are riskier as they have more areas or sectors that are more prone to damages. This stems from their fragile nature and states. Moreover, many of their parts and constituents are obsolete and tend to wear out a little bit too easily when confronted with heavy stress or pressure.
These kinds of homes tend to have shorter lifespans. That means they are more likely to demand compensation from the insurance companies too soon. The younger ones have a long way to go and may never hence demand for the homeowners to be compensated at least in the meantime.
Purchasing an old home may affect your coverage or pricing of the insurance in the following two main ways:
You are more likely to be asked to pay up higher premiums if you own an older home. That is because such homes are generally considered a high risk. The Insurance companies want to leave nothing to chance. This of course disparages the homeowners as they tend to dig deeper into their pockets for these services.
Might need extra coverages
An older home might require extra coverage because they are prone to more accidents than a regular home. If the house is considered to have too many Hazards it might also be denied coverage until these are addressed. Overall, extra coverage means higher insurance rates too.
Tips to Decrease Premiums
In case you inevitably have to purchase an older home, all is not lost. It is still possible for you to reduce your premium. Below are some of the strategies you may have to follow get a lower premium:
Upgrade the plumbing
First, carry out house upgrades of the plumbing of the home you choose to purchase. When the home has up-to-date plumbing items, it tends to be viewed as less risky. That way, the insurance companies are less likely to demand higher premiums than they would under normal circumstances.
Repaint and refurbish
Repainting and refurbishing old premises give some false sense of newness. Insurance companies are subsequently more likely to ask for fewer premiums than they would if the home looked shabby and less spruced. Moreover, refurbishing also makes the homes stronger and less likely to shatter.
Install safety apparatus
Fixing a couple of safety apparatus around the house and adhering to some home safety tips have also jointly been noted to improve their values, reduce their risks and bring down the overall costs of insurance premiums. Some of these safety apparatuses are carbon dioxide detectors, smoke alarms, smart locks, and sensors.
Here are some specific risk factors that might affect home insurance rates:
Risks are, for a large part, location-specific. That means certain risks are more likely to occur in certain areas as opposed to others. For instance, hurricanes and tsunamis are generally more likely to happen in coastal communities than inland. Insurance companies must thus take these into account. If your house is older and doesn't have any structures built to avoid location-specific risk, they will also be deemed riskier.
Buying an older house might mean that the wiring system in it might still be aluminum instead of copper (primarily houses built back in the 60's). Aluminum wire was a cheaper alternative back then in the 60’s and therefore was commonly used for house wiring. However, solid aluminum wiring often causes connection failures and is also considered fire hazards.
Older residents rarely use power above 60 amp. The design was typical in the early 40's and 50's. However, when installing appliances that use high electricity, the 60amp power will most likely blow or trip the breaker. In worst-case scenarios, they might even cause a fire. Due to potential fire hazards, some insurance companies might not even provide coverage until you replace it with at least 100 amp power.
Perils in Older houses
Perils are the events that can trigger damages or serious losses to your property. Insurance companies would most commonly consider perils such as incidents caused by strong wind, hail damage, fire incidents, theft, and vandalism actions. With the exception of theft and vandalism, older homes are more susceptible to these perils than their younger counterparts. That is what makes the older homes to be generally deemed as high risk.
Older Homes Worth Investing
To some extent, yes! If you have a tight budget but it is just enough to buy a cheaper older house and do enough repairs and improvements to the house, you might be able to save money in the long run. Improvements can also be made gradually and at some point, you might be able to save enough money on premiums to make your purchase worth it! Newer homes are generally way more expensive. If you have less money, there is no point in insisting on them. The older ones may just do as well.
We have come a long way indeed. Many thanks for staying with us till the end. As you may see, the older homes have some risks attached to them no doubt. Nonetheless, they still have certain benefits attached to them that make a purchase worth attempting. So, how about you go ahead and finish making the purchase of the home you were considering? We can help you get set up with the insurance process afterwards.