A Conversation About Property Insurance Issues for Historic Homes

Last summer, HSI began to receive calls and emails from owners of historic houses. Their insurance agents were telling them they couldn’t get their property insurance renewed because they display an HSI house plaque.  Some of the owners who reached out to us had a house in an historic district, but some did not.
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Our research into this issue found that, when agents were doing online property research for a policy, they would see an image of the house in Google Maps with an HSI historic house plaque and then find additional information in the Massachusetts Cultural Resource Information System (MACRIS), which is available online.  Much of the MACRIS aggregated historical survey data was created by Massachusetts communities and submitted to the Massachusetts Historical Commission for archiving.  It’s a valuable resource for understanding the history of historic properties in the Commonwealth, including those on the National Register of Historic Places.
 
We had never heard of historic markers on a house being a cause for trouble getting insurance so in late August (before Hurricanes Helene and Milton), we reached out to veteran Salem insurance agent Paul Soucy of Soucy Insurance to find out what might be behind this.
  
Q:  Paul, Owners of historic houses in Salem have been reaching out to us recently having been told by their insurance agent that they can’t get their property insurance renewed because they have an HSI house plaque displayed.  What’s happening?
A:  That’s a great question. Insurance companies often equate the presence of an historic plaque with restrictions on repairs and/or reconstruction imposed by an historical commission. If a home is on the National Register, there are guidelines that dictate the repair process, and these guidelines will likely increase the cost of repairs. However, the presence of a plaque from HSI should not present a problem for underwriters. The same reasoning should apply to a home that is listed on the MACRIS website as these designations don’t usually come with restrictions on reconstruction. While historic homes are one of Salem’s greatest treasures, they also present a unique challenge to insurers. Since it is difficult to assess the actual replacement cost of historical homes due to their unique construction, insurance companies face uncertainty regarding the ultimate cost of repairs. Generally, repair costs for older homes will be higher than repair costs of newer homes. Also, historic homes may have lead paint, asbestos insulation, knob and tube wiring, older plumbing and heating elements, slate roofs, etc. Removing or replacing these dated items all add to increased claims costs.
 
Q:  Why is this suddenly becoming an issue now? 
 A:  Insurance companies have experienced poor underwriting performance over the past few years. The increase in claims has been driven by inflation and increasingly severe weather events countrywide. As a result, underwriters are becoming much more cautious about the homes they insure. To that end, insurance underwriters are using new technology to learn more about their exposure.  An aerial view showing an HSI plaque is often the first clue of the historic nature of a home. Now, MACRIS mapping is also available online and insurers are using that information as well. If a homeowner gets pushback from the insurance company, he should have a conversation with his agent. Not all insurance companies will have the same restrictions. Options are available.
  
Q:  Paul, Salem is an old city with over 4,000 historic properties, and HSI advocates for all of them.  Over time, HSI has found that well cared for historic houses maintain their value, even in real estate market downturns.  We know, however, that we’re also a coastal community.  Fortunately, we haven’t experienced the dramatic damaging weather and flooding events that other communities in Florida, Georgia, the Carolinas, and Texas have had.  But have those losses impacted what we can expect in premiums for property coverage here?
A:  Unfortunately, yes.  This is the reality we all live in right now. Insurance companies purchase “reinsurance,” that is, insurance to cover their own losses. Reinsurance carriers have dramatically increased rates over the past few years, (think of wildfires in Maui, hurricanes in Florida, and active tornado seasons), and they pass this loss along to insurance companies through increased premiums. Unfortunately, these costs ultimately get passed down to the consumer. One way insurance companies manage their reinsurance costs is to avoid writing homes near the coast. For some carriers a “coastal” location may mean property within 2 miles of the coast!!  Regarding the future, we should see rate increases abate next year, but that is dependent upon lower inflation and fewer catastrophic events.
 
With rising sea levels, Salem is becoming more at risk of flooding. The customary solution to flood insurance has been to purchase flood coverage from the Federal government through the National Flood Insurance Program (NFIP). Not surprisingly, rates have increased substantially due to large losses and lack of governmental subsidies. Homeowners can also obtain quotes from one of the many “private” flood insurers that have taken over much of the flood insurance market.
 
Q:  Other than the risk of flood/hurricane, what other factors are impacting insurance coverage and rates for historic property owners in Salem?
A:  The main thing here is to maintain your home. Poor claims history will have a negative impact on insurance availability and cost. A well maintained roof, clear gutters, adequate insulation, updated plumbing, heating, and wiring are all a critical part of underwriting a historic home. Also, consider installation of a central station burglar, fire, and water sensor system. Not only will these measures prevent future losses, they will also likely lower your insurance costs.
 
Q:  Paul, There are houses in Salem for each of the four centuries of our city.  Have you found that the property insurance premiums for houses in our historic districts have been generally more expensive? 
A.  The insurance isn’t necessarily more expensive, but the cost of home insurance will be affected by the amount of insurance carried. As I mentioned, older homes are significantly more expensive to repair. Also, the cost of insurance will be affected by the amount and extent of updates to the property such as roof, wiring, plumbing, heating, etc.
  
Q:  Paul, How can a homeowner respond to an agent’s raising the issue of an HSI house plaque being displayed or being in an historic district?
A. Have a conversation with your agent. Most likely, your agent will have an alternative for you.
  
Q:  Paul, An agent should shop around for the best price/value insurance for their customer, but it seems that insurance companies are making it more difficult for everyone by either raising rates or not writing policies.  What can the consumer do?   At the current rate, the long-term outlook is dire for those who own an historic property in Salem.
A.  I don’t think the situation is necessarily “dire.” Yes, rates are increasing for everyone, not just owners of historic homes, and yes, many carriers are either exiting the home insurance market in Massachusetts or imposing more restrictions on underwriting, but insurance will be available for a well maintained and updated historic home.

Thanks, Paul, for your insights on insurance for historic properties!