Homeowners insurance isn't something most people think about very often, most often it's considered when buying and selling property or when the bill comes.

That was the case for my own homeowners insurance. I took it for granted that my 1923 Craftsman was insured. We put our house on the market and received an offer from people I could trust to take care of my historic house. But the offer was contingent upon the purchaser's ability to secure insurance, which I didn't consider to be an obstacle.

I was more concerned with the purchaser's intent to retain all the original windows.

The purchasers were turned down by at least two insurance companies, including our own. Eventually, after numerous phone calls and an electrical inspection, our company agreed to cover the new owners. With hindsight, I realize our coverage may not have included key elements all historic homeowners should have.

A Big Problem

The issue of insuring historic property was also raised when I worked as the Historic Preservation Officer for a city in Western Washington. A resident in a large historic district contacted me to express his frustration at being dropped by his insurance company once they realized his house was listed on the historic register. When I contacted his insurance company they refused to explain to me why they would not cover a registered historic property. They are one of the major insurance companies in Washington State.

It's a problem that appears to be growing as insurance companies tighten their underwriting rules. The National Trust for Historic Preservation (NTHP) recognizes the difficulty and has established a relationship with a firm called Maury, Donnelly and Part (MDP) to help historic property owners bridge some of the serious gaps many people have in the coverage of their historic properties.

The Washington State Office of the Insurance Commissioner (OIC) advises people looking for coverage for their historic property to contact large insurance brokers who represent more than one insurance company. These brokers tend to be able to find more specialized coverage than the average homeowner requires and also tend to find the best coverage for the best price.

If you've experienced difficulties in securing insurance for your historic property, contact OIC at (800) 562-6900 or online at http://www.insurance.wa.gov/consumers/complaint.asp where you can file a complaint online. This office tracks all trends in insurance and if a practice appears to be unfair, they investigate and work to establish a level of fairness for all parties involved. If a significant number of historic property owners are experiencing difficulty securing insurance, the OIC will investigate.

One challenge is that insurance companies don't have to file their underwriting rules with OIC so OIC doesn't have a way of tracking which companies refuse insurance for historic properties.

One of OIC's recent successes was in creating a disclosure statement during real estate transactions to authorize the release of a Comprehensive Loss Underwriting Exchange (CLUE) report. This is another insurance trend that could potentially affect historic property owners.

ChoicePoint's Comprehensive Loss Underwriting Exchange (CLUE) is the database of consumer claims that insurance companies access when assessing risk for underwriting or rating insurance policies. This database was created around 30 years ago and has only recently been used in the manner it's being used today. The database was primarily for auto insurance but has become a way for insurance companies to find out how many claims have been filed both by consumers and per property. The database focuses on wind prone areas and water damage because of the risk of mildew and rot.

Various insurance companies have recently consulted this database. When a number of claims have been made by one individual, or for one particular property the insurance company may perceive it to be a risk to provide coverage and deny applicants coverage.

There is also an element called "zero-dollar" claim which is when a person calls their company about the possibility of a claim but doesn't actually file a claim. That call is logged and can count against the person and property's record. Not all insurance companies use CLUE, so be sure to ask when researching for your insurance.

After selling our home and while working on our new house we sought renters' insurance while living in a rental house. When our insurance company found a $400 water damage claim from three years ago, they denied us coverage. This is after we had been with this insurance company for 13 years without a single claim.

Under Coverage?

When you research for insurance coverage, make sure the type of coverage you select is the most appropriate for your property. Below is a list of types of coverage and definitions which may help you in determining if you have selected the right type of coverage. These definitions are from Mortgage101.com

Replacement cost: Insurance that pays the policyholder the cost of the damaged property without deduction for depreciation, but limited to a maximum dollar amount.

Guaranteed replacement cost: Insurance that pays the full cost of replacing damaged property, without a deduction for depreciation and without a dollar limit. This coverage is not available in all states and some companies limit the coverage to 120% of the cost of rebuilding your home. This gives you protection against such things as a sudden increase in construction costs due to a shortage of building materials.

Actual cash value: Insurance under which the policyholder receives an amount equal to the replacement value of damaged property minus an allowance for depreciation. Unless a homeowner's policy specifies that property is covered for its replacement value, the coverage is for actual cash value.

Practical Advice for Insurance Seekers

You also want to keep in mind that even if your homeowners' insurance satisfies your mortgage company, you may not be fully covered. Mortgage companies are only concerned with coverage for the mortgage amount. If you've put down a large down payment, have significant equity, or if replacement cost of any historically significant features of your historic property exceeds the amount you're covered for, you are stuck.

Be aware that some insurance companies require that you take contractors with the lowest bid. As most of us know, the lowest bidder isn't always the most qualified to work on historic buildings. Historic buildings require more expertise and patience than some contractors are able to provide.

Maryland's Historical Trust recommends considering coverage that includes replacement cost or a special endorsement to cover the cost of unique or hard-to-find materials and features. Those endorsements cost extra and not all insurance companies offer them.

As a preventative measure, maintain an up-to-date inventory with photos to document the condition of your property. Keep this inventory in a safety deposit box or other safe place. Keep any receipts you may have, a copy of your property's nomination to any historic register, and any other information that may substantiate your claim that your property is historically significant and identifies character defining elements of your property.

The advice of many insurance professionals is to think of homeowners insurance as disaster insurance rather than filing claims for items that can be paid for out of pocket. This helps to reduce risk of the CLUE database hurting your ability to secure insurance, or for future owners to secure insurance for your current house.

Also, as with many aspects of historic homeownership, be as careful in selecting your insurance company as you would be hiring a contractor to restore your plaster, light fixtures, windows or whatever elements of your historic property you work so hard to preserve. When you own a historic home you can't expect to find replacement parts at Home Depot, you shouldn't expect big box insurance to adequately cover you as well. Take your time, do your homework and make sure you get the best coverage you are able for your property.

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