The Difficulties in Insuring Older Properties

Insuring a typical contemporary strip-mall building is fairly straightforward; securing property insurance for an older building, especially a historic property built with legacy materials and techniques, is a different story. For example, older buildings were constructed using materials and techniques that not only aren’t common anymore – they may not even be available. Because older structures tend to be in neighborhoods and areas that are older, they often don’t have the fireproofing required in newer buildings, meaning that they have an elevated fire risk from nearby structures.

Not all insurance companies or agents understand how to underwrite an older property to ensure the property owner is protected. AmSuisse is a specialty insurance wholesaler that understands the unique underwriting needs of difficult-to-insure older properties. Before an agent takes on the task of insuring an older building, they should consider the following hurdles.

Replacement Value Methodology

Commercial properties are typically insured by utilizing their replacement value as guidance in setting policy limits and premiums. While the replacement value is generally the cost it would require to rebuild a structure on the same site with the same function, older properties, especially those with historic value, may not be fully covered with this methodology. For example, a standard replacement value policy will limit rebuilding a 100-year old theater that has unique, vintage trim, custom mahogany amenities in the lobby, and antique cinematic artifacts to replacement with a generic modern building design.

Legacy Materials and Construction Methods

A standard commercial property insurance policy only covers construction techniques and materials when the skilled labor and materials are easily available and the construction costs are within industry standards guidelines. This means that allowances must be made when purchasing an insurance policy in order to cover the skilled labor and materials required to rebuild a unique older building while keeping its original attraction and function.

Another option, actual cash value replacement, isn’t practical for an older building, as the property owner will only receive reimbursement for the property’s book value – after a depreciation deduction, which on an older property can be substantial. Functional replacement cost coverage may replace older materials and fixtures with new alternatives, but there may be a reduction in value. The other alternative, covering the structure for its present market value, isn’t optimal either, as the property may bring a lower market price than the replacement cost.

Historic Replacement Cost

Owners of older buildings, especially antique structures, need to get actual historic replacement costs built into their insurance policy. Older properties aren’t generally served well with a standard cookie-cutter property insurance policy. They need a carrier who provides this type of policy and an agent who frequently deals with these unique issues in order to ensure the client receives adequate coverage.

When insuring an older property, it’s important to remember that the standard commercial property insurance policy will not provide the coverage needed. For a hard-to-place property, it’s crucial to have a property insurance program that addresses all of its risks.


About AmSuisse

Formed in 2013, AmSuisse, Inc. has quickly distinguished itself as a wholesale operation that specializes in working very closely with our agents and broker partners to develop responsive, individualized service for each client. Our unparalleled writing support, industry-specific expertise, marketing support, responsive proposals and quotes, strong customer service, and strong relationships with our carrier partners have all helped us to provide the best possible coverage for our clients. To learn more about our available coverage, contact us today at (800) 485-0229 to speak with one of our representatives.