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 The
Money Management Newsletter: Home
Ownership
Older homes may need upgrades for insurance
Compiled by John-Andrew Newman (with files from NC and FSCO)
A Companion Advisor article
If the house you own is more than 30 years old, your insurance company may require
you to upgrade the plumbing, electrical, and heating systems before renewing
your homeowners' policy.
Or, if you're making an offer to buy an older home - one that may have galvanized
steel plumbing, 60-amp electrical service, knob-and-tube electrical wiring,
an external fuel oil tank, or a wood-burning stove - make sure you factor in
the cost of necessary upgrades into your offering price. An insurance representative
will be able to advise on the upgrades needed to acquire homeowners' coverage.
The Financial Services Commission of Ontario (FSCO) - the agency responsible
for regulating insurance in the province - has posted an excellent guideline
for older homes' coverage on their website. Here's an excerpt, with more details
available at fsco.gov.on.ca:
Galvanized steel plumbing: Commonly installed in homes before 1950,
this plumbing has a life expectancy of 40 to 50 years. Over time, corrosion
presents an increased risk of leaks and ruptures causing potential water damage.
Upgrades may be required to get insurance coverage.
60-amp electrical service: After 40 or 50 years, this system poses the
threat of overheating with overuse, thus increasing the risk of an electrical
fire. An upgrade to 100 amps may be required, or the installation of a switching
device that allows for the operation of only one major appliance at a time.
Knob-and-tube wiring: Given their age, the wires in many homes over
50 years are highly susceptible to wearing and exposure, presenting a serious
safety hazard. In contrast to contemporary wiring, this type has no ground wire.
The unintentional contact of the hot and neutral wires may cause an electrical
fire. However, some insurers may consider insuring homes with wiring issues,
if inspected and deemed safe by the Electrical Safety Authority in Ontario.
Fuel oil tanks: At 25 years or older, oil tanks are highly susceptible
to rusting, deterioration, and leakage - and are also considered environmental
hazards. Removal, or replacement with a gas or electrical furnace may be required.
Wood-burning stoves: To reduce the risk of fire, your insurance company
may ask for your stove to be inspected by a certified technician. Similarly,
you may also be required to get it thoroughly cleaned and inspected at least
once a year prior to renewing your policy.
Given the wide range of inspection and upgrade requirements needed to insure
an older home, it's always best to pose your questions directly to your insurance
representative. More information is available online at fsco.gov.on.ca.
Another consideration is to engage the services of a home inspection firm and
ask that they particularly look and report on the above-mentioned conditions.
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©
, Fiscal Agents Money Management Newsletter
25 Lakeshore Road, Oakville, On L6J 5B4.
(905) 844-7700
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