Macon is blessed with many older homes that grace the downtown area. Most of these homes are in the College Street area, Ingleside, Cherokee Heights or the Vineville corridor. Many have been purchased at very attractive prices, including foreclosures. But what is the cost to insure one of these homes? I will tell you that it far exceeds the market value.
In looking at the tax records for several of the homes in the College Street area, they sold for $125,000 to $304,000. All were built in the 1800s, have more than 4,000 square feet of living space. Most all have plaster walls and ceilings. So why can’t the owners just get a homeowners policy for the market price? Because the value of dwelling coverage on a homeowner’s policy is based on replacement cost, not market value.
If any of these homes are on the National Historic Register, that is another concern. Property owners can do whatever they want with their property as long as no federal money is attached to the property. There may be some state or local preservation laws the homeowner should check on before they proceed with rebuilding or remodeling.
So what can homeowners insurance cost on one of these homes? Typically, these homes have plaster walls and ceilings, decorative pediments, fireplace inserts and mantels. For insurance purposes they fall into a different category from a home less than 50 years old as you determine replacement cost value.
The cost to insure them can be as high as $300 per square foot. That is about triple the normal cost. So, if you have a home that has 4,000 square feet, the replacement cost value can be $1.2 million with a cost to insure running up to $7,000 per year. A policy with functional replacement cost, ie. replacing plaster walls and ceilings with sheetrock would reduce the cost to about $200 per square foot.
Then there is the question of rental units in the home. Many of these homes have basement apartments that are rented out. Most insurance companies will cover that exposure but for only one rental unit. To cover the home and two or more rental units you would probably have to go through an agent and a broker to secure coverage on the excess and surplus market with a carrier like Lloyd’s of London. There is nothing wrong with that coverage; it is just not regulated like a domestic carrier.
Bottom line is to work with your agent to make sure you have the coverage you want. Know the difference between actual cash value or stated value and replacement cost. Help preserve these valuable assets to our community and be a good steward of our history.
Dave Pushman is the former regional vice president of Geico in Macon and is now an independent insurance agent with Tidwell and Hilburn Insurance. He can be reached at email@example.com.