Lose your head buying older home? Look at insurance rate !
Buying an older home? Paying for safety upgrades can save you money
Installing or upgrading smoke alarms, CO2 detectors, smart locks and other safety equipment in an older home 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 appreciate why this is important, you need to know the factors that the insurance companies used to settle on the costs of house insurance and the periodic repayments thereof:
What is home insurance and what is normally included and excluded on this.
This is a form of property insurance that seeks to cover the losses and or damages that may arise and inflict your private residence. A typical home insurance plan covers the following areas and items:
It does not include:
Termites and insect damage
Bird or rodent damage
General wear and tear
What are premiums and why is it that the age of the house matters when deciding premiums?
Insurance premiums refer to an amount of money that businesses and individuals remit to the insurance companies as part of their insurance policy obligations. 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.
- Shorter lifespans
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.
How might buying an old house affect any coverage or pricing of the insurance?
Purchasing an old home may affect your coverage or pricing of the insurance in the following two main ways:
- Higher premiums
You are more likely to be asked to pay up higher premiums. That is because such homes are generally considered as 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.
- Stricter penalties on defaults
In the event of a default, such homeowners will yet again be confronted with stricter penalties. They will generally have to pay higher rates of interest and other surcharges if they fall behind the payments of such premiums. This is a somewhat risky position to find yourself in.
What steps can I take to help decrease the premium I pay when I owe an older house?
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.
Would the insurance company focus on specific risk factors posed by an older house?
YES, they would! Indeed, risks are for a large part location-specific. That simply 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.
What are perils? And which are commonly considered by home insurance. Would the age of the house affect these coverages?
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.
At the end, is it worth saving the money in buying a cheaper house when there might be such a high premium?
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 getting set up with the insurance process afterwards.
One important factor to consider
One important thing insurers will look at when buying an older home is the power panel and the wiring, as these are the major cause of fire for older houses.
If you have a house that uses aluminum wiring (mostly houses built back in the 60's) when the copper price was up to the roof, aluminum wire was a cost-effective alternative back then), however, solid aluminum wiring in older residential homes has resulted in failures of connections at electrical devices, either due to poor quality and coefficient of expansion between aluminum wire present a potential fire hazard.
Power panel with less than 100 amp
Older residents rarely use power above 60amp and thus, the design is common in the early 40's and 50's when electric stove or dryer is not popular. However, installing appliances of such now would easily trip the breaker and, worst, cause a fire if the entire electrical was design to drive lower power consumption. Due to potential fire hazards, the insurance company would not provide coverage until replaced with at least 100 amp power by a certified electrician.