Insurance for 3-Plex

[Jesse Smith]

I'm having trouble finding a straight answer on this one.  What kind of insurance should I be looking for on a 3-plex?  This is a former single family residence that has been converted to three living units.  I also plan to eventually convert the attached garage to a fourth unit.  

State Farm sent a quote for a "CMP Apartment Policy," with an annual premium of $3,898.  Compared to the policy on our duplex, which only has a premium of $1,120, this seems crazy high. 

• What kind of policy do I need for the property?
• Should I insure for full replacement cost, mortgage amount, or something else?
• What other considerations?

[John Mocker]

Jesse,

I can't comment on the Direct Writers like State Farm but we represent over 30 companies that deal with independent agents.  The way they insure 1, 2, 3 & 4 family buildings varies but falls into one or two general areas:

1. Personal Insurance policies - The "Dwelling / Fire" policy is used for 1-4 unit rental properties. 

2. Commercial Insurance - Either a "Business Owners" or "Package" Policy is used for the rental dwellings.

Often they are named something else (aka Landlords policy) but the basic form is ususally one of the above.  Which form is better for your property will depend.  Often, on an individual property the Dwelling/Fire form is less expensive but that is not always the case.  The Business Owners or Package policies can often handle multiple properties which saves on paperwork and may give a better rate on multiple locations.

I suggest you contact Multiple Independent Agents and interview them for their experience in insuring Rentals.  If you know others who own rentals in the area see who they are using.   Because of your plan to convert the Garage, ask the agents you do decide to use, how the companies they are quoting will handle it.  

Good luck on the new property