How to Appraise and Insure Historic Homes

New technology, historical home insurance help to protect treasured properties

Many urban and suburban areas are made more distinctive thanks to the historic homes nestled in their neighborhoods. Keeping history alive through these special homes is not always easy. With a slowing economy, owners find it can be easier and less expensive to tear down an older home rather than maintain and restore it. Older homes also present their own set of safety challenges.

Certain aspects of historic homes can be underinsured without the right expert handling the appraisal and underwriting process. Insuring a national or city landmark requires expertise and reliance on new technology to accurately appraise and insure these unique residential structures.

Insurance Journal recently visited such a historic home in the Old Norwood section of Chicago’s far northwest side. The neighborhood boasts the oldest home in Chicago, the Noble-Seymour Crippen House that was built in August 1833 and now serves as the area’s historical society. The Old Norwood neighborhood has been designated a landmark neighborhood and is listed in the National Register of Historic Places.

The home visited by IJ is an “American Four Square” and has been restored and filled with precious collectibles and antiques by its owners who bought the home in 1982.

Technology

The Chubb Group of Insurance Cos. sent a team to the Old Norwood home for a full appraisal. The couple said the home was insured, but that the policy they had did not address any of the landmark’s unique structural parts such as the original wood in the staircase or floors that would be very expensive to replace, or the valuables (contents) within the home. The previous insurer appraised the building without including any historic components.

According to Mark L. Schussel, vice president and public relations manager for Chubb Group of Insurance Cos., in order to successfully insure and appraise historic properties, the insurer should hire individuals with proper credentials in both architecture and engineering.

“These experts have been trained to come into the historic home and to validate the structure with all the details and then document everything in a full appraisal so the homeowner has a complete picture of their treasure as well as how to protect it and what it would cost to replace,” Schussel said.

One hi-tech tool that Chubb uses in its appraisal process is a Masterpiece HomeScan, an infrared camera that can identify moisture problems, cold and hot air leaks, and potential fire hazards in the home. The technology is used by police departments on crime scenes.

“With the camera, problems can be detected early, allowing the homeowner to fix a drafty area or moisture problem in a cost effective way,” Schussel said. “In other cases, correcting leaks and moisture damage could prevent frozen pipes and that can lead to lower heating and cooling costs. In an historical property, it can mean avoiding very expensive repairs down the road as well as preserving a landmark.”

When replacing insured property in a historical home, Chubb would go above the limits, if necessary, Schussel said. For example, if tan historic home insured for $2 million had a stairway built from a unique type of wood, or a fireplace with unusual tiles, and the cost of replacing the structure in the same “kind and quality” reaches $3 million — Chubb would consider going up to $3 million, he said.

Other experts including Fireman’s Fund also use technology to give historic homeowners valuable information.

“Our Prestige Advisory Services vendor partners provide on-site advice to our policyholders on how to mitigate risks that are unique to historic structures, such as water security, restoration, and historic landscaping,” said Mark McCormick, director, Risk Management Advisory Services. “Our risk managers use moisture meters and voltage testers to check for both water leaks and electrical safety. In addition, risk managers partner with our claims department to determine how to provide effective pre-loss risk management advice based on our post-lost data.”

Fireman’s Fund and Chubb said they believe new technology is helping homeowners detect problems in historic residential structures early on, allowing those committed to restoration the ability to do so in the most economical way possible.

For all historic homes, Fireman’s Fund does extensive research via the Library of Congress and state historical commissions to determine the historic nature of the risk, added McCormick.

“This research allows us to chart the best course of action for risk management advice and gives us credibility in the eyes of the policyholder and agent,” McCormick said.

Contents Matter

Mitch Ziemer, property product director at Fireman’s Fund, said that according to the National Historic Registry Web site there are 1.3 million certified landmarks in the United States. Many of these landmark homes have expensive paintings, jewelry, glass collections, expensive floor coverings and other unique characteristics that demonstrate the need to properly insure the contents as well as the property’s structure.

“Unlike the average home, historic home contents are usually covered up to 70 percent of the value of the home — rather than the normal 50 percent for a non-historic property,” Ziemer said. And the deductible is not included, he added.

Travelers Insurance, while it does not offer a specific “historic” home policy, does offer coverage for older homes under its high value home program.

“While we do not have a specific historic home program per se, we do have a high value home or Platinum Plus product available in most states that enhances the typical coverages found under most homeowners policies,” said Gary Hafner, director for Travelers’ personal insurance, National Property Division.

“The coverages include an additional 100 percent of replacement cost protection on the home itself, as well as several other broadened or increased personal property and liability coverages for the customer.”

Most historic homes that Travelers encounters qualify for this program, according to Hafner. The insurer has a minimum home replacement value of $500,000 in most states. Historic homes with a replacement value of less than that amount will normally qualify for one of the company’s other homeowners programs.

It’s important to acknowledge that some older or historical homes may be uninsurable, according to Travelers’ Hafner.

“Typically, this occurs only when the home itself has significant safety hazards such as inadequate or unsafe electrical wiring, does not have adequate fire protection, or where there is a commercial type exposure on the premises. For example, if there are daily public tours of the home or the home involves a retail souvenir store on the premises,” Hafner said.

Topics Tech Property Homeowners Risk Management Chubb