Rental Property Investor · Providence, RI · Member since 2018 · 75 posts · 35 votes
Knob & tube is the first generation of wiring and still prevalent in Providence, RI, where I live, work and invest. Are there any companies that currently write policies for multi-family investment properties with knob & tube wiring? Rewiring these big houses often kills a proforma. Many landlords I know just don't tell their insurance companies they have any in their buildings to get the lower rates. Way too much risk for me. Is there some sort of umbrella policy that could cover something like this?
My recommendation is to replace the breaker box; it's a cheap date compared to replacing the wiring - and rewiring will not increase the value of the property. I would call a few commercial property inspection companies and ask which insurers in your area will accept which box with your wiring. I had no problem getting insurance with that wiring because of the upgraded breaker box - which the insurance company's inspector certified.
@Nelson Taylor not that I'm aware of. I asked my insurance agent this a couple of months ago on a 6-unit in Pawtucket, since it looked like knob & tube might kill the deal, and he said, "The knob and tube is a major problem. No one wants to insure that. No one. Not surplus lines. No one. The owner needs to deal with that before the closing."
It turned out that it was only a legal 5 unit so that specific deal ended up being killed for multiple reasons, but my experience is the same as yours, that it's a persistent problem.
I have partners who have basically lied to the insurance company and bank to close the deal, but then addressed it immediately after closing by rewiring the building. As you said, that gets expensive and can really lower the return, so it has to be a very good deal to start with to justify going down that road.
Hoping someone else replies with something different, of course!
My take on this subject is it’s not just an insurance problem but a tenant problem with not enough outlet or can’t handle the load because of less total circuits. Options is to have the seller fix it or have them credit you the cost and not tell insurance and immediately fix it after closing, because like Anthony said it’s a deal killer
I don't know if Travelers does business in RI or not but in my area they will take knob & tube as long as it is in good shape and is hooked up to a breaker box that is 100 amps or more.
My recommendation is to replace the breaker box; it's a cheap date compared to replacing the wiring - and rewiring will not increase the value of the property. I would call a few commercial property inspection companies and ask which insurers in your area will accept which box with your wiring. I had no problem getting insurance with that wiring because of the upgraded breaker box - which the insurance company's inspector certified.
We can't get coverage here on knob/tube & screw in fuse panels are a nightmare. Panels in closets are also not to code or accepted by our insurance carriers. I've seen a lot of burnt out junction boxes where the joists/studs were charcoaled from days of old. The smoked residue of cloth wire wrap was also evident in the majority.
My son had college friends renting a 3 unit (12 occupants) on a single 60amp screw in fuse panel. Just to use the microwave they had to disconnect all other appliances including the fridge. They had me look at the panel & it was jimmied (with obvious signs of flashing) to allow excess current through all the circuits including the bypassed cartridge fuses.
The over-lamped light fixtures would constantly flicker, as did the plasma TV. The poor guy in the illegal attic crawlspace/room was screwed in the event of a fire (there were no smoke/CO detectors anywhere). The cat sized rats & remnants of the occasional sewer back-up & mold in the basement were just another issue & yet that landlord was pulling $1800/month back in 2005.
We represent over 30 markets. As far as I know, none will write a property with Knob & Tub or aluminum wiring. There are specialty markets that will write the policy. They are usually more expensive and have lower coverage or more exclusions. More and more companies are inspecting and will issue cancellation. Also, if the question is on the application and you answer that there is no Knob & Tube, you may end up with an uncovered loss if the correct answer would have made you ineligible for the policy.
I agree with John here about the uncovered loss part.
Even more importantly, what I want investors to know is that they need to think about the safety of the occupants in the building. If there is any unsafe condition, electrical or otherwise, it could cause a serious injury or even death. Don't compromise your own or others' safety to get a deal done or try to create a bigger profit. It's easy to get short-sighted, but that can be even more costly than losing out on a deal, both financially and emotionally.
Not sure if BP will let me link it here, but the International Association of Certified Home Inspectors (InterNACHI) has a great rundown about Knob & Tube.
I know it doesn't solve the problem of "hey, I'd like to get this insured, but most of the industry doesn't do it", but I think sometimes it's helpful to understand the reasons why they don't... and maybe that can help some accept the need for the cost to upgrade too...
I’d update the breaker box and any exposed knob and tube . Then tell the insurance it’s been updated . I got a guy that will update to new panels for 450$ and he does them LIVE without turning off the electric at the meter .
@Patricia Steiner I believe the knob and tube is the main issue and has nothing to do with upgrading the box. The wiring needs to be updated, the box is irrelevant.
Change it out or have the seller do it. YOu are talking about 100 year old wiring. It is NOT an option. It is not something to try to find an insurance agent who covers it. GET IT DONE.
Hopefully you have heard enough reasons why it should get done.
You're right to think about the liability and safety of people in your buildings. Can you just get it rewired?
Here's another thing. Most people have "code upgrade" coverage in their policies so if you have an insurance claim that requires you to touch the electrical, you may have coverage as part of that claim to update it.