WHAT YOU SHOULD KNOW ABOUT INSURANCE COVERAGE ISSUES AFFECTING OLDER HOMES

Thursday, January 3, 2013

If your home is over 30 years old, your insurance company may require you to upgrade the plumbing, electrical, roof, hot water tank and/or heating systems in your home prior to providing you with, or renewing, your homeowners insurance policy. If you are looking to purchase an older home that has galvanized steel plumbing, 60-amp electrical service, knob & tube wiring, wood-burning stove or fuel oil tank, make sure to factor the cost of necessary upgrades into your offering price. You will also want to contact your insurance broker to discuss how these items will affect the cost and ability to buy insurance.

Concerns about Galvanized Steel Plumbing: Galvanized steel pipes, commonly installed in homes prior to 1950, have an average life expectancy of 40-50 years. Over time, the galvanized steel pipes begin to rust or corrode from the inside out, resulting in reduced water pressure and restricted water flow. This presents an increased risk of leaks or ruptures occurring in the pipes and the potential for water damage. Replacement of these pipes with copper or plastic piping may be required before insurance can be placed.

Dangers Associated with 60-Amp Electrical Service: Today’s appliances combined with all the accessories are simply too much for 60-Amp and Knob & Tube wiring. Insurance Companies have a very real concern when it comes to these systems as they poses the threat of overuse and overheating thus increasing the risk of an electrical fire. Insurance companies will almost always require you to upgrade your electrical service to 100-amps.

Knob & Tube: More common in homes over 50 years of age, knob & tube consists of parallel hot (black) and neutral (white) wires, separated by knobs (or insulators) and ceramic tubes. Knob & Tube wiring is considered higher risk mainly because;

  • There is no ground wire.
  • Given their age, the wires are highly susceptible to wearing and exposure, presenting a serious safety hazard.
  • The unintentional contact of the hot and neutral wires may potentially cause an electrical fire.

Insurance companies will typically require all knob & tube to be replaced with approved permanent wiring completed to current building code.
Aluminum Wiring: Aluminum wiring, while not ideal, is still considered acceptable providing;
  • All connections are pigtailed.
  • Work is completed by a certified electrician.
  • A written report by the certified electrician confirming such work has been completed.

Wood-burning Stoves: Wood Stoves when not installed or used properly, can pose a serious fire hazard. To reduce risk to you the homeowner and the potential of a claim, your insurance company will require a completed Wood Stove Questionnaire and an inspection by a certified Wood Energy Technical Training (WETT) technician. The stove must also be certified by the Underwriters Laboratories of Canada (ULC), Canadian Standard Association (CSA) or Warnock Hersey before Insurers will agree to provide coverage. Wood Stoves should be thoroughly cleaned and inspected by a professional sweep or technician at least once per year depending on usage.

Fuel Tanks Must be Removed: Tanks 25 years or older are highly susceptible to rusting, deterioration and leakage and are considered environmental hazards. If a fuel oil leak occurs and goes undetected, the environmental cleanup for such a situation can be immense. A pinhole leak can spill 750 litres of oil in 8 hours and have cleanup costs in excess of $25,000. We highly recommend that you allow for the cost of removing such tanks when purchasing a new home.

Old Hot Water Tanks: Hot Water tanks are due to tire and fail and when they do, serious water damage can result. A typical failure will see the bottom of the tank corrode and fall away from the tank leaving water run everywhere. This type of loss is particularly concerning when the tank is located somewhere other than the bottom floor and not near a drain. While an insurance company will not decline coverage for an older tank, consideration should be given to replacing the tank before its life expectancy is up.

Is it Time for a New Roof?: The condition of your roof is very important to an insurance company. A roof in poor condition will often result in some sort of water damage claim. If the claim is due to the wear, tear and deterioration of the roof then you may not have coverage resulting in huge costs and inconvenience for the homeowner. Coverage is seldom declined for an older roof but higher premiums can result, exclusions to coverage and conditions to replace the roof within 30 or 60 days are often attached as a condition of coverage.

Information courtesy of Schill Insurance. Note: Given the wide range of inspection/upgrade requirements that insurance companies may have, it’s always best to speak to your insurance broker about a specific situation.


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