Get a different carrier.

If your electrician, who would obviously benefit financially from rewiring your house, tells you that the wiring is in good shape, then I probably wouldn't worry about replacing it. As for your insurance company, that becomes an simple math exercise. Compare the estimated savings in insurance premiums to the cost of rewiring and factor in how long you plan on staying in the house.

Let's say that that rewiring the house costs $1,000 and doing so would save $100 per year in insurance premiums. Your break even would be 10 years. If you plan on being there only 5 more years, you're going to be $500 behind. Now rewiring the house may add something to it's value when you do decide to sell and/or may allow your house to sell more quickly but that's a much less precise number.

You might also want to shop around for insurance.

The term "cloth covered" is also rather nebulous. Older type NM cable, other than not having a proper ground in it, is typically fine. I've never heard of an properly informed insurer having an issue.

Knob and Tube may be a different story but that's not "cloth covered." K&T can be safe if still in open air and undisturbed yet many insurers do indeed have issue with them.

Thanks, luckily it's not know and tube.

My 1940 house used the spiral metal covered cable with a cloth-like covering on the wires inside. The only issue I've seen with deterioration of insulation is where the wire is connected to light fixtures that had high wattage bulbs or a fixture that trapped all the heat inside the junction box. Heat apparently broke down the insulation over time and it sometimes flakes off when trying to put on a wire nut. When replacing these fixtures I've been able to tape any short areas if the insulation seems to be breaking up, but the problems have been minimal.

If you have a ceiling or wall open and can easily replace old wiring, I would spend the money now, but I wouldn't make a point to start replacing everything. My insurance company never even asked about the wiring type.

Bruce

You can have that same problem with plastic sheathed cables as well.

Try finding a new light fixture that doesn't require it to be connected to wire rated for at least 90°C by the UL Listing. That is nm-B which was not around before 1984.

From the insurance companies I have talked to, they automatically assume that your wiring is from the same year the house was built, and charge accordingly. If you produce a bill from an electrician and a signed off electrical permit, then you can get a discount. They never seem to bring this up when you purchase the insurance.

I'm beginning to have major doubts about your insurance agent. I suspect she's got some incentive to churn you to a new underwriter. I'm not even sure how the insurance companies are apprised of your wiring. I've owned houses that indeed still had knob and tube and no insurer has ever asked for an inspection report. I'm certainly not going to volunteer one. Again, older ROMEX installations are cloth covered and there's NOT a problem there. I suspect that the agent and her beloved underwriter was thinking K&T but again that's NOT cloth covered, it's rubber covered.

@ Ron- I left the first agency and have gone with another agency. They both required 4 pt. inspection reports that show photos of the panels opened. Also, both agents have said the carrier will do their own inspection in addition to looking over the inspection reports.

The only problems I can think of are if the wire gage is too small (gage # is too high) or if the insulation is rubber, which does oxidize and get brittle with time. I don't think rubber insulation was being used when your house was built.

The agent told me none of her carriers would insure a house with cloth-covered wire. She said it was becoming an industry policy. She couldn't tell me why.

I read posts like this and wonder if I've just been lucky with my insurance. I've never had them even ask about something as specific as the wiring in my house when I got a policy. They are more interested in whether the local fire department is volunteer, and how far it is to the nearest hydrant, or whether I have a centrally monitored alarm system.

Bruce

The last house I lived in the insurance company threatened to cancel my policy unless I put a new roof on. They said they don't cover houses with roofs over 20 years old, and mine had just turned 20. I had been planning to do it anyways, so it was no big deal at the time.

Don't ask don't tell is always the best policy with insurance..... I had my panel replaced a few years ago and they didn't mind hooking up a few of the cloth covered I have. If it was a problem the electricians didn't know about it or its not a real problem. Most of my house is rewired but I do have a few cloth. I actually did some work recently and stripped one of those cloth a bit further back and the insulation around the wires was in fine condition and actually thicker than the NM wire.

@vith- I agree, I would never tell an insurer there is old wiring. The inspectors are very thorough nowadays, it seems (well, not to actually buy the house,just to insure it). I swear every inch of the house was photographed and is part of the report. The wires are clearly visible in one of the pics of the panel with the front removed. The panel and most of the wiring are fairly new. The carrier has a copy of the report, but is still sending their own inspector to do a site visit.