Insuring Old Houses - The Definitive New Zealand Guide
Our guide covers the insurance challenges faced by owners of old houses, what insurers consider, must-know homeowner experiences, FAQs and next steps to take to help make an informed decision.
Updated 19 October 2023
Summary:
Know This: Beyond insurers' demands for sound original piles and foundations in pre-1935 homes, insurers also want to verify many aspects, including the replacement of original electrical wiring with TPS wiring, a roof that's either in good condition or replaced within the past 30 years, absence of Scrim or Sarking wall linings, no historical classification and maintained exterior cladding without defects.
Our guide explains what you need to know about insuring an old houses; we cover the following:
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- Insurers are reluctant to insure houses with electrical, plumbing, and structural issues that need attention. Evidence of such issues can be common in houses built before 1935 and make insuring (and selling) such a house very difficult.
- As a background, 1935 is the turning point of construction in New Zealand, centering around the 1935 Napier earthquake. After the massive destruction, a nationwide building code was first introduced requiring masonry to be firmly reinforced alongside other stipulations.
- This means that, by default, pre-1935 buildings have been built 'without code'. While pre-1935 houses weren’t on the risk radar of insurers for many years, the 2010 and 2011 Christchurch earthquakes changed that.
- Per this 2013 RNZ story, the Insurance Council confirmed insurers were now reluctant to insure pre-1935 buildings, which tend to be mainly made of brick because they did not stand up well to the Christchurch earthquakes.
- This quickly became a problem for homeowners (and home sellers), and hasn’t been specific to Christchurch - this story from the Otago Daily Times explains the issue and why it's a problem for homeowners.
Know This: Beyond insurers' demands for sound original piles and foundations in pre-1935 homes, insurers also want to verify many aspects, including the replacement of original electrical wiring with TPS wiring, a roof that's either in good condition or replaced within the past 30 years, absence of Scrim or Sarking wall linings, no historical classification and maintained exterior cladding without defects.
Our guide explains what you need to know about insuring an old houses; we cover the following:
- Understanding the Historical Context of 1935
- Must-Know Facts: Understanding the Insurance Challenges Faced by Owners of Old Houses
- What Do Insurers Consider When Assessing an Old House?
- New Zealand Homeowners and Experts Share Experiences of Insuring an Old House
- Frequently Asked Questions for Homeowners and Potential Buyers of Old Houses
- Our Conclusion and Next Steps To Take
Advertising Disclaimer: MoneyHub may earn a referral bonus for anyone that’s approved through some of the below links. Our research and findings are independent of any bank, credit card issuer, or product manufacturer/service provider, and have not been endorsed by any of these entities. Please see our Advertising Policy for more details about how we make money.
MoneyHub Founder Christopher Walsh Explains How Our Friends at Initio Offer Instant Quotes For Old Houses:
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Understanding the Historical Context of 1935
1935 stands as a pivotal moment in New Zealand's construction history. On 3rd February 1931, the Napier earthquake, also called the Hawke's Bay earthquake, struck the North Island. With a magnitude of 7.8, it razed much of the towns of Napier and Hastings, leading to the unfortunate demise of at least 256 people.
The aftermath of this devastation made it clear that the country's buildings, many made of unreinforced masonry, were ill-equipped to withstand such seismic forces. As a response, New Zealand introduced a nationwide building code in the years that followed. This marked the beginning of a new era of construction in the country.
The 1935 benchmark signifies the shift from older, 'without code' constructions to constructed buildings adhering to these new seismic standards, ensuring greater safety and resilience.
The aftermath of this devastation made it clear that the country's buildings, many made of unreinforced masonry, were ill-equipped to withstand such seismic forces. As a response, New Zealand introduced a nationwide building code in the years that followed. This marked the beginning of a new era of construction in the country.
The 1935 benchmark signifies the shift from older, 'without code' constructions to constructed buildings adhering to these new seismic standards, ensuring greater safety and resilience.
Must-Know Facts: Understanding the Insurance Challenges Faced by Owners of Old Houses
Owning an old house comes with specific insurance challenges:
- Reluctance from Insurers: As the very foundation of these houses predates the seismic regulations implemented after the 1935 Napier earthquake, many insurers view them as 'high risk'. This often leads to outright rejection or the imposition of restrictive conditions on insurance policies.
- Financial Implications: This reluctance translates into potentially higher insurance premiums for homeowners. Even if coverage is granted, it might come with a higher excess or specific exclusions, especially for damages that can be traced back to the house's age or its original construction methods, such as wiring.
- Renovation and Upgrade Costs: Beyond the direct insurance costs, homeowners may face the financial burden of mandatory renovations. Updating outdated systems like electrical wiring, plumbing, or structural elements to meet modern safety standards can be a significant expense.
- Documentation and Proofs: Insurers often demand extensive documentation and proof of renovations, which can be challenging for homeowners, especially if renovations were carried out decades ago and paperwork was lost or never issued.
What Do Insurers Consider When Assessing an Old House?
Many insurers need a lot of proof and certificates before giving a quote to cover an old house. Before getting a quote, you should know:
Insurance entities often vary in their requirements and considerations:
- Year of Construction: Exact date or approximate period.
- Renovations History: All restorative efforts, updates, and structural changes were made.
- Current Status: Details on the state of the electrical system, plumbing, and overall structure.
Insurance entities often vary in their requirements and considerations:
- Inspections: Many will require professional evaluations of the house's current condition.
- Terms & Conditions: Even if an insurer agrees to cover your home, understand any conditional clauses, exclusions or mandatory upgrade requirements they might have.
New Zealand Homeowners and Experts Share Experiences of Insuring an Old House
While it's essential to get online quotes to verify whether an old house can be insured, many factors contribute to policy prices and exclusions. In the section below, we've included a selection of unverified experiences shared by New Zealanders online and from our MoneyHub community. If you want to share your experience insuring an old house, please contact our research team.
"I purchased a pre-1935 house but faced insurance issues due to outdated wiring, which I hadn't considered before buying the house. My bank agreed to insure the property but excluded electrical fires. I agreed to that, rewired the house, and provided proof to the bank, whereby they lifted the exclusion. I then compared insurers and switched to a cheaper provider without complications".
"We purchased a 1927 house and insured it with a well-known insurer. The main concerns from the insurer were about the replacement or updating of wiring and plumbing, which had been done a few years ago. Without new wiring and plumbing, I'm uncertain what the insurance implications would have been."
"For our 1930s home purchase, the insurer needed at least 3 out of 5 elements updated: roof, wiring, piles, interior walls, and plumbing. Using our building report, we secured insurance without issues. Even though we eventually replaced an ageing roof, it wasn't a requirement by the insurer since other areas met their standards."
"I worked for a major insurer; underwriting a pre-1935 house required the property to have been replumbed, rewired, repiled, reroofed, and relined. If a builder's report verifies these updates, there usually won't be any restrictions, but policies and limits can vary among insurers".
"I worked as an underwriter and broker; properties built before 1935 almost always have additional insurance considerations. Specifically, insurers may inquire if the property has been comprehensively rewired and if it contains scrim. While such houses aren't uninsurable, they might have certain terms and conditions.
For example, there might be a $10,000 fire excess due to potentially outdated wiring if no safety compliance certificate is available. Scrim could lead to an outright exclusion from fire claims until it's entirely removed. Because of the risks, having all relevant documentation on hand is advisable when shopping for insurance".
Our research further confirmed further reports from owners of old houses and how they maximise their insurance coverage:
- Specific renovations are essential: Many homeowners emphasised the importance of updating outdated systems, such as modernisation wiring and roofing.
- Seek Multiple Quotes: Our research confirms that quotes vary; insurance companies differ significantly in evaluating risk, so getting numerous online quotes is essential.
- Policy Transfer: A recurrent tip was to leverage existing insurance policies of the property as they might be easier to transfer than sourcing a new one.
- 1940 is a Watershed Year: Houses built post-1940 usually face fewer insurance challenges due to the revised building standards.
- The Condition of a House is Important: Age alone isn't the only determinant. A well-maintained 1920 house might be in better condition than a neglected 1960 one.
MoneyHub Founder Christopher Walsh Explains How Our Friends at Initio Offer Instant Quotes For Old Houses:
Christopher Walsh
MoneyHub Founder |
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Frequently Asked Questions for Homeowners and Potential Buyers of Old Houses
There's a lot to cover. We've grouped our FAQs into several sections to help you cover the risks and make important decisions with ease.
1. Structural and Material Concerns FAQs:
1. Structural and Material Concerns FAQs:
Will my pre-1935 house's original wiring impact insurance approval?
Almost certainly. Older rubber-coated wires deteriorate over time, increasing the risk of electrical fires. Modern standards require safer, more durable materials. Therefore, many insurers either insist on an update or, if they provide coverage, may impose higher premiums.
Does the roofing of my pre-1935 house affect my insurance premiums?
Yes - an older roof, especially if it hasn't been replaced in the last 30 years, might increase your insurance premiums due to higher susceptibility to damages and leaks. Some insurers could even make coverage conditional upon a roof replacement.
Are insurance companies concerned about scrim walls in older houses?
Yes - Scrim, a type of hessian sacking, was used in many pre-1935 houses. Due to its flammable nature, it's seen as a fire hazard. Many insurers will require proof of its removal or replacement before agreeing to cover your home.
How do exterior cladding defects in older houses impact insurance?
Unmaintained weatherboards or cladding can lead to rot, reducing the house's weather-tightness and overall structural stability. Insurance companies often require these defects to be addressed before offering coverage, given the potential risks they pose.
Will foundational issues in older houses affect my insurance coverage?
Yes - foundational problems, such as sinking or rotting, can compromise the house's structural integrity. For many insurers, a house with such issues is considered high-risk, leading to higher premiums or even denial of coverage. Historical and Classification Concerns
How does a historical classification of my house affect insurance?
Houses with historical classifications often have restrictions on repairs, renovations, and rebuilding. This can complicate potential claims. Consequently, many insurers may decline to insure such homes or might only offer coverage with certain exclusions.
2. Insurer Processes and Considerations FAQs:
How do insurers determine the 'condition' of an older house?
Insurers often rely on professional house inspection reports. These evaluations look at the structural integrity, electrical and plumbing systems, roofing, foundations, and other critical elements of the house.
What if I can't provide all the documentation requested by the insurer?
Lack of documentation can be a challenge. Some insurers might accept photographic evidence, statements from licensed contractors, or other forms of validation. However, discussing and clarifying directly with the insurer is always best.
3. Economic and Financial Aspects FAQs:
Is it more expensive to insure a renovated old house versus a modern house?
Not necessarily. The insurance cost depends on the home's post-renovation condition, the quality of the updates, the materials used, and how closely the renovations adhere to modern safety standards. If renovated to high standards, an old house might not cost significantly more to insure than a newer one.
Is there any government aid or subsidy for renovating older houses to meet insurance standards?
While there isn't a specific nationwide subsidy, some local councils may offer grants or low-interest loans for specific renovations, especially if they aim to preserve heritage houses. It's always good to check with your local council.
4. Insurance Companies and Their Offerings FAQs:
Are there insurers specialising in older houses?
No, but some insurers are proactive in making insurance more transparent. We see Initio as the main player based on several factors, including online resources, industry commentary, and policy specifics. We argue that Initio focuses on delivering fast quotes to owners of older houses. Many insurers will assess your home's age and give an instant hard pass - Initio uses its data to deliver the most accurate quote.
How critical is earthquake strengthening for my older house's insurance?
Given New Zealand's seismic history, it's relevant, especially in quake-prone regions, insurers take account of a building's earthquake resistance. Some might provide conditional coverage, stipulating mandatory retrofitting within a stipulated period. Unlike commercial buildings, which receive a rating of earthquake strength compared to current new building standard (NBS), residential dwellings do not receive an earthquake strength rating.
Our Conclusion and Next Steps To Take
Understanding the risks of limited insurance is vital for homeowners and potential buyers of pre-1935 houses. To help limit the risks, we list some actionable next steps to consider:
- Thorough Home Inspection: Before buying an old house, get a detailed home inspection from a reputable company to understand the condition of the house and any potential issues.
- Consult Legal Experts: If unsure about the conditions or clauses of an insurance policy, it might be beneficial to consult a legal expert specialising in property and insurance law.
- Maintenance and Renovation: If you already own an old house, consider a schedule for regular maintenance and necessary renovations. This proactive approach can make insuring the property easier and might even result in lower premiums.
- Keep Documentation: Any renovations or updates done to the house should be thoroughly documented. Store these in a safe place and consider digital backups.
MoneyHub Founder Christopher Walsh Explains How Our Friends at Initio Offer Instant Quotes For Old Houses:
Christopher Walsh
MoneyHub Founder |
|
|
