Proof of Major Updates to Insure Older Properties?

Question

Hello, All!

I spoke with a local Insurance Broker recently to get a better understanding of the potential complications when buying old, vacant homes to rehab into rental properties.

She mentioned that I would need to show proof of updating electric, plumbing, heating and AC in order to get insurance on homes older than 25 - 30 years.

Is this true? Are there any exceptions to be aware of? Would I have to rewire all the electrical or would there be some lesser update that is acceptable?

Any help is appreciated!

Michael Norris · Answer

I wish I had a blanket answer for you on that - every company is different and it can vary from state to state and even by zip code if they have had a lot of one particular type of loss in a given area.

If you are looking at homes 30 years old...It seems a bit extreme to ask for proof of updates on a home built in 1987. Ask again and mention the year built and you may get a different answer.

I'm so used to insuring houses built around 1900 to 1930 that it comes up a lot more often. 1987 is like new construction to me! Ha

Michael Norris · Answer

Some companies will require you to prove all the updates and others may require little to no proof. Some companies will give you a discounted premium for making those updates you mentioned above while others just want to see that it is done.

If you ask most electricians they will say Knob & Tube wiring is just fine but almost no insurance company will cover a house that is acknowledged as having it. You can't fight that type of industry wide thinking.

What does updated electric mean? Ha - you will get a different answer every time you ask. If it has a Fed Pacific box or the old fuses and you replace those - many companies won't ask for proof of anything else such as what is behind the walls?

Lying on a policy application isn't an issue as long as you don't have a claim (that was sarcasm). If/when a claim happens everything will be looked at and if false or misleading statements were made on the application that is grounds for denying the claim.

Why are older homes given extra scrutiny? Just one example - Pre-1930 homes have no fire blocking in the walls - if a fire breaches a wall of the home it will shoot up inside the wall to the attic and very quickly and efficiently burn the whole house.

What to do? Shop around.

The company I use for older homes is Foremost - they don't necessarily require the improvements be made (state by state) but they offset that by surcharging based on the age.

Where I live most of the investment properties are pre 1970 with a huge amount much older than that so it's maybe not as big of a deal here.

Good luck!

Richard Dorn · Answer

@Michael Norris Thank you for your response.

That all seems to make sense, but her age-range seems a little low. With a little googleing it seems many of those systems have typical lifespans of 50 or 60 years. Perhaps those estimates are grossly over inflated.

Will the insurance companies require updates based on the results of an inspection or just the age of the house/last update?