Why is Homeowners Insurance so Inexpensive for Brand New Construction Homes
If you are in the market for a new home you may be looking at both old homes and newer builds. While you may love the look and feel of an older home, in many cases they can end up being more expensive in the long run.
Maintaining an older home is often more expensive than a more modern house and this can impact your insurance rates as well. While it certainly varies by home and location, in general an older home will be more expensive to insure than a new one.
There are a number of reasons that homeowners insurance tends to be cheaper for newer homes. Here is a quick overview of the main reasons you can insure a newer home cheaper than an older one.
New Home Equals Lower Risk
When it comes to homeowners insurance, the cost to repair or replace your home and the claim risk that your home presents all factor into your premium.
Newer homes are often a lower risk because they are built to current codes, incorporate standard building materials and all of the expensive features of the home are brand new. All of this points to a lower chance of a claim and if you do have to make a claim a lower repair or rebuild cost.
Older homes are filled with risks as far as an insurance company is concerned. Aging mechanical systems, older roofs and building materials that may prove costly to repair or replace are common in older homes, which often leads to more expensive claims.
Up to Code
Building codes change over time and in many cases older homes are no longer up to code. This means that your insurer will have to bring your home up to code if they are repairing it or rebuilding it due to a covered claim. This can end up adding significant costs to the job.
Out of code electrical or plumbing can also increase your odds of making a claim as it increases the chance of a fire or flooding issue.
A new home on the other hand should be completely up to code with all systems in working order. This decreases your risk of making a claim, which is music to an insurers ears. The less chance of a claim, the happier an insurer will be and the better rate they will offer.
Roofs are expensive and the older your roof is, the more likely it is to receive damage due to a storm or other sudden event. Older roofs are more likely to leak as well, leading to an expensive claim and repair. The odds that your insurer will have to cover a roof claim are much higher on older homes and insurers will price that risk into your premium.
A brand new home comes with a brand new roof. This lowers the odds of a leak or an expensive roofing claim, leading to a lower premium.
HVAC and Other Critical Systems
Heating, air conditioning, plumbing and other major systems are also expensive to repair and replace. In a new build they are brand new and under warranty for a few years, which lowers an insurers risk of an expensive claim, leading to a lower premium.
Older homes may have outdated electrical and HVAC systems which can lead to leaks and other expensive claims which is why older homes tend to be more expensive to insure.
This is especially true if your home is quite old. Older homes are often built with materials or techniques that are no longer common which makes them much more expensive to insure to repair or rebuild.
Plaster walls, stained glass windows, custom molding, wooden flooring and other custom made features can add significant costs to repairs, leading to higher premiums.
Newer homes tend to be built with commonly used materials making repairs or rebuilds easier and less expensive.
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