Insurance for for first rental property

[Justin Hall]

What type of coverages should I have for insurance on my duplex? I want to cover myself but also not spend too much where I handicap my cash flow. I have gotten a couple quotes and both of the quotes have the dwelling coverage for way more than the house is worth; is this normal? Should I also have liability coverage on the policy? Thanks in advance!

[Jacob Sampson]

I always recommend insuring for what you purchased not for replacement cost.  Replacement cost is why it is insured for more than it is worth.  If the rental burns up you file the claim, pay off the mortgage and sell the lot.  You aren't going to rebuild a new building, most of the time.

I also set my deductible for 5k.  My goal with insurance is to cover a catastrophe anything else I will cover myself.  This keeps my insurance premium low.

This does of course require you to be disciplined with retaining strong cash reserves.