Tips for insuring a historic home

Marcus Pickett

Whether your home is an ornate Victorian or a lovingly restored farmhouse, if it’s a piece of history, it has special homeowner’s insurance needs.

For some owners, the biggest priority is to protect the historical significance and one-of-a-kind qualities of the building and its environs. In this case, the owner should buy an insurance policy that covers complete replacement costs without a deduction for depreciation. In other words, buy enough insurance to cover the costs of the antique fixtures and of contractors needed to restore your home to its former splendor, instead of buying just enough to cover its market value.

If the owner’s top priority is to simply protect the financial value of the property, consider insuring it for its cash value. However, if the home is destroyed, you’ll be reimbursed only for the market value of the home and the belongings inside it — which may not be enough money to rebuild.

Historic home values

With historic buildings, home insurance needs and coverage are rarely straightforward. The childhood home of a famous historical figure, for example, may never hold the same value after a total property loss, even if it’s rebuilt to the exact same specifications, because the property has lost its original materials and furnishings.

Because basic home insurance is better suited to modern homes, some insurance companies have developed specialized policies for historic dwellings and their unique, hard-to-replace landscaping and contents. Fireman’s Fund Insurance Co., for example, offers two separate Prestige Home policies that cover (with no deduction for depreciation) full replacement costs for the home and contents, as well as increased costs because of revised property assessments and changes in local building, zoning or land-use codes.

Cutting through the red tape to rebuild

As a historic home owner, it’s critical to know local building, zoning and land-use codes and whether your personal priorities for the home might be usurped by local laws. If your historic home is damaged, local authorities may require that you rebuild it in compliance with present-day building codes.

Local historic preservation societies also might want a say in any repairs you make. There’s no uniform standard for what constitutes a historic dwelling or property. Some people mistakenly assume historic designation of a building must be directly tied to a historically important event or a historic former resident. However, a distinctive method of construction or workmanship that connects a home to a certain historic period can be enough for a historic designation, according to the National Register of Historic Places.

Is my home historic?

The Planning Department of Delaware County, Pa., outlines some distinguishing factors that set historic homes apart from modern houses. Carefully consider your insurance needs and replacement costs if your home has the following:

• Varying materials like wood, masonry and metals that have been matched carefully to the locale or climate.
• Long-lasting materials that can endure many decades (compared with 10 to 25 years in homes built more recently) when well-maintained.
• Permeable construction that absorbs water and releases it through evaporation, rather than modern construction that emphasizes water tightness.
• Natural energy efficiency and climate control through the use of building materials, openings and building placement, rather than through insulation and modern temperature control systems.
• Thick, heavy building materials with low levels of artificial insulation.

Tax breaks, other resources for historic homes

Government incentives might help curb expensive repair costs. If a historic home or property is used to generate income — as a rental property or business — and needs significant renovations, the owner may be entitled to claim the Federal Rehabilitation Tax Credit.

According to the IRS, a credit equal to 10 percent of rehabilitation costs is available for buildings used before 1936. The amount goes up to 20 percent for buildings that are historically certified (through the National Register of Historic Places, for example), and up to 26 percent for buildings destroyed by certain disasters (Hurricane Katrina, for example). Likewise, many state and local governments offer similar tax credits for renovation of historic properties. Individual property owners are typically excluded, however.

Once your historical renovation or reconstruction has been approved for the Federal Rehabilitation Tax Credit, you have another reason to buy insurance because the credit becomes an insurable asset. If a catastrophe strikes while you’re rehabilitating a historic building, the building no longer may be considered historically significant — and you could lose the tax credit. This relatively new type of insurance, provided through companies like National Trust Insurance Services, covers the value of the credit.