How Does Replacement Cost Coverage Work With Older Vintage Homes?
If you own an older vintage home, it is essential to know how your home insurance will cover damages. Often you have a choice between Replacement Cost and Functional Replacement Cost when you buy the policy upfront. This way, when a claim comes around, you aren't hit with a surprise.
Replacement Cost is the most common level of protection in a standard HO-3 home insurance policy. In simple terms, it means like-for-like replacement. If you have stained glass windows and replacement costs, in a claims scenario, you are getting a new set of stained glass windows. When it comes to older housing architecture, replacement cost means the vintage style will be rebuilt and replaced.
Functional Replacement Cost
Functional Replacement Cost is usually a more affordable coverage option for your home insurance because the carrier isn't going to replace damages precisely like for like, but substitute functional modern-day equivalent building materials for the old vintage materials. Functional replacement cost is more practical for the insurance carrier and more affordable for the homeowner.
Be Careful of the HO-8 Trap
Sometimes, an insurance agent will offer you an HO-8 policy at Functional Replacement Cost. While the HO-8 is a functional replacement cost policy, it excludes a lot of common perils, so be very careful about buying this type of plan. It should only be your policy of last resort.
If you want to protect and maintain that vintage feel, make sure you don't buy a functional replacement cost policy, but get full replacement cost. If you are okay with getting more modern replacement materials on your home, a Functional Replacement Cost Policy is a more affordable option, but make sure you aren't sacrificing coverage by purchasing an HO-8 policy.
I hope that helps!
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