Historic Property - Best Practices for Insurance

Historic properties are unique, both in terms of construction and risk. Similarly, historic property insurance is a unique product for high net-worth clients who value the cultural cachet of their property. It can function similarly to luxury home insurance and often appeals to the same type of client. However, insuring historic property can present singular challenges not encountered with standard home insurance. Understanding the coverage options and unique considerations for historic property insurance can help insurance agents meet the needs of these discerning clients.

Understanding Historic Property Designation

What makes a specific building or property historic? It depends on the location of the building or estate. Generally speaking, there are two national criteria that must be met before a property can be officially designated as "historic:"

• The property must "retain a high degree of integrity;" i.e., it must retain the physical characteristics that convey its historicity. This may include difficult-to-source materials, bespoke craftsmanship, and historic contents on or within the property.
• The property must be nationally significant to the American identity. This could mean it is associated with a significant historical event, figure, or theme; that it has a distinct historical architectural style, is part of a significant historical district, or can provide significant archaeological information.

There may be other locally-determined criteria that must be met before a property can be considered historic on a state or county level. These criteria are important, not just for classification, but also for underwriting historic property insurance. Knowing which elements are central to a property’s historic identity should guide the creation of a policy to protect those elements, and thus the overall value of the property. Agents should reach out to the state historic preservation office and any other local historic preservation organizations to get a complete picture of requirements and regulations when assessing structures and determining if they require historic property insurance.

Compliance With Preservation Standards

As mentioned above, a property must retain a high degree of physical integrity for it to meet the historicity criteria. There are several national standards and guidelines for this provided by the Secretary of the Interior. Failure to meet these standards could disqualify a property from the national registry, and thus make it ineligible for historic property insurance. Agents should be familiar with these guidelines when assessing a historic property, and should make their high net-worth clients aware of these standards as well.

Assessing Risk and Value

When appraising a historic property, much of its value often comes from the specific materials and methods used for construction. Accordingly, determining risk and replacement costs requires a bit more consideration. Certain elements, such as unique tiling or wooden flooring, may have high replacement costs. Other elements may have such unique craftsmanship or historical significance that they can’t be replaced at all. On the other hand, historical properties may also contain expensive items like paintings, jewelry, and furniture that contribute to their historicity. This often necessitates a higher degree of coverage for historic home contents than is usually encountered in standard home insurance policies. Insurance agents should consult with historical and architectural experts to get a full and accurate picture. These experts may also be able to bring in specialized technology like moisture and voltage meters to provide even more acute insight.

Crafting Specialized Insurance Policies

Standard homeowner’s insurance usually isn’t going to cover the unique risks of historical properties. Insurance agents with historic property clients will want to carefully craft policies that provide sufficient coverage for preservation and, if needed, restoration. Be sure to consult with experts on the specific restoration techniques and materials that could be required.

Insurance endorsements can also help craft the perfect historic property policy. Consider offering endorsements like guaranteed replacement cost coverage to address gaps in standard policies. Flood and water backup coverage, service line coverage, and even sinkhole coverage endorsements should all be considered when determining how to meet the unique risks of historic property.

Historic Property Insurance Best Practices

Now that we’ve reviewed what makes historic property insurance so unique, let’s walk through some best practices for assessing a property and crafting an effective policy.

1. Collaborating with Preservation Experts

   As we’ve mentioned above, working with the right experts can help insurance agents elevate their offerings. Historians and conservation specialists have professional insight into the true value of historic properties. Incorporating their expertise into the underwriting and claims processes helps ensure that nothing is overlooked.
   
   Agents should also go out of their way to keep clear and detailed records of any past restoration efforts. Not only will this aid in the underwriting process, but it can also help ensure that the property owner is in compliance with historic property regulations and standards.

2. Claims Handling and Restoration Support

   
   Historic property claims should always be approached with a focus on preservation and authenticity. When investigating a claim, adjusters should be armed with knowledge of the property’s historical significance and where it comes from. This is crucial when claims require replacing unique materials or hiring skilled labor to replicate unique craftsmanship. Again, this is where it pays to consult with historical experts. Their knowledge can help support historically accurate restoration and ensure client compliance with preservation guidelines.

Emerging Trends and Regulatory Changes

Historic property insurance is an ever-changing field. A greater incidence of "billion-dollar weather events" like wildfires and hurricanes has only increased the degree of risk involved, often leading to more expensive policies. But as the unique challenges of preserving historic properties evolve, so do risk assessment tools and preservation regulations. Insurance agents should stay abreast of these changes, as well as industry responses. Innovations in historic property insurance can lead to new coverage options that address the unique challenges of covering historic property.

Historic Property Insurance With Novatae

Insuring historic properties is a complex task, with rare materials, bespoke features, and singular craftsmanship to protect. Agents can surmount these challenges by consulting with the right experts, familiarizing high net-worth clients with local and national regulations, and utilizing the latest innovations in assessment tools and technology.

When your high-net-worth clients require specialty insurance policies for their singular historic homes, Novatae has the experience to provide customized solutions suited to their needs. Contact Novatae for more information.

This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.