I own a 1920s Craftsman Airbnb with original plaster walls and stained glass. A kitchen fire destroyed the back half. The insurance adjuster is offering to pay for drywall and Home Depot trim, citing “Functional Replacement Cost.” To restore the original plaster and millwork would cost $150,000 more than they are offering.
Key Takeaways
- Functional Replacement Cost: This clause allows insurers to repair with “modern equivalents” (drywall instead of plaster). It destroys the value of historic homes.
- Reproduction Cost: You need “Reproduction Cost” coverage, which pays to restore with materials of like kind and quality (historic accuracy).
- Ordinance or Law: Historic homes never meet modern codes. When you rebuild, you will be forced to upgrade wiring/plumbing. This coverage pays for those mandatory upgrades.
- Extended Replacement Cost: Inflation in 2026 is high. You need a buffer (usually 125% or 150%) to cover surging material prices.
The “Why” (The Trap)
The trap is “Standard Construction Valuation.”
Standard policies use software like Xactimate that assumes modern construction techniques (2×4 studs, drywall). Historic homes use lath-and-plaster, rough-hewn timber, and slate. The cost difference is massive. If you don’t have a “Historic” or “Restoration” specific policy, you are underinsured by 50%.
The Investigation: I Called Them
- Chubb: They are the gold standard for historic homes. They use “Reproduction Cost.” I quoted a 1920s home. The premium was double, but the agent said, “If the crown molding burns, we hire a craftsman to recreate it.”
- Proper Insurance: They allow you to insure for “Replacement Cost” but you must set the limit high enough to cover historic materials. They don’t force “Functional” replacement.
- State Farm: The agent warned me, “On a home this old, we might only offer Actual Cash Value (depreciated) on the roof and plumbing unless you update them.”
Comparison Table: Historic Home Valuation
| Feature | Standard Policy (Functional) | Historic Policy (Reproduction) | Airbnb AirCover |
| Plaster Walls | Replaced with Drywall | Restored as Plaster | Cash Settlement (likely low) |
| Custom Millwork | Replaced with Standard Pine | Recreated Custom | Depreciated Value |
| Code Upgrades | Limited (10%) | High Limits | NO |
[IMAGE: Split photo. Left: Ornate 1920s plaster ceiling. Right: Standard flat drywall. Caption: ‘The difference between Reproduction and Functional Replacement’]
Step-by-Step Action Plan
- Get a specialized Appraisal: Don’t trust Zillow. Hire a historic home appraiser to determine the true cost of rebuilding.
- Check for “Functional Replacement” Clause: Search your policy PDF for this phrase. If it’s there, you are not covered for a historic restoration.
- Max Out “Ordinance or Law”: Set this to at least 25% or 50% of your dwelling limit. A fire in an old house triggers full electrical/plumbing rewiring requirements.
- Update Systems: To get good insurance, you must update the “Knob and Tube” wiring. Most carriers won’t touch it.
FAQ
Will AirCover pay to restore my stained glass?
Likely no. They will pay the market value of a “window.” You will fight for months to prove the artistic value.
What is the “Coinsurance Clause”?
If you insure the house for $300k but it costs $600k to rebuild (because of historic materials), the insurer will penalty-tax your payout. You must insure to value.
Can I insure the antiques inside?
Yes, but you need a “Fine Arts Floater” or schedule them separately. Standard contents coverage has low limits for antiques.