I am in the process of analyzing some deals and I had a question regarding the insurance underwriting process. First, how is real estate insurance calculated, replacement cost?

I want to be able to input a base number x% of the purchase price. The x could be scaled up or down depending on the age of the home.

Ex: An older one would have a 1% x purchase price = annual insurance premium.

Ex: A newer home would have a 2% x purchase price = annual insurance premium.

Would this be a decent rough estimate or are there better ways? Again, I want something scalable to be able to apply to multiple properties quickly and effectively.

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Jason Bott

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Jason Bott

Pro Member

#2 Insurance Contributor

Insurance Agent
Nationwide

Replied April 21, 2022 07:25

Quote from @Daniel Sanchez:

Howdy Folks,

I am in the process of analyzing some deals and I had a question regarding the insurance underwriting process. First, how is real estate insurance calculated, replacement cost?

I want to be able to input a base number x% of the purchase price. The x could be scaled up or down depending on the age of the home.

Daniel, you should connect with a local agent as your area can have Flood and Wind/Hail issues that can add large premium swings. They should be able to get you some ball park pricing and the areas where you will have to pay a % premium above the base premium.

please keep in mind, even if you do this, the estimates could be way off. Good luck.

Jason Bott

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Scott E.

Developer
Scottsdale, AZ

Scott E.

Developer
Scottsdale, AZ

Replied April 21, 2022 07:31

I'm not an insurance agent but I've had dozens of policies over the years on primary residences, house flips, short term rentals, and long term rentals. The annual insurance premium around here always runs right around 0.5% of the value at most.

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Baselane