How Much Homeowners Insurance?

[Steven Horvath]

Just wondering what the correct way to do things are. I currently have homeowners insurance on what i owe on my rental (80k) not the value of the property (105K). Should my rental be insured for the full value of the building, building + land, or just what i owe?
I am sure the land doesnt need to be insured as it isnt going anywere. Thanks for the info!
Steven

[David J.]

The issue is whether you want a "stated value" policy or a "replacement cost" policy. With the replacement cost, you get a rebuilt home and the insurance company sets the value of the policy. The issue with the stated value is that you set the value of your home, or coverage, and whether you get a check for the loss or a partially rebuilt home is determined by the language in the policy.

You have to be very careful here because many stated value policies don't cut you a check. They rebuild up to the value of the policy and leave you there. Be sure to read your policy well if you decide to go stated value. You want a check to cover the mortgage and then sell the rest for as much as you can get for it a walk away. To me this is a bad plan just to save $10 a month in premiums.

As for the preference, I think if you get the replacement value and just increase the deductible you would be paying the same amount in premiums and you would have a policy that will cover the replacement of the loss. That is what I decided to do.