Rental Property insurance...why so EXPENSIVE??

[Pamela D Williams]

Hi everyone!  I'm a new landlord (lady?)...just purchased a duplex and closing on a fourplex on Thursday. My question is, why is the insurance so darn expensive? My agent said they are required to insure properties at replacement cost, which is WAY more than I paid. Do other states have this requirement? It really blew me away, and seriously cut in to my expected cash flow.

[Derek Lacy]

Here’s what everyone misses. On the below example of 108k replacement and 35k market value.

Let’s say 50% of the dwelling burns down. What do you want $17,500 or $54,000?

Because I guarantee that even $54,000 will seem a little short when you rebuild.

Or if you choose to tear down and move on, are you willing to pay $10,000 for the tear down and take the $27,500 loss?

Now if you have 50+ houses,this is a different topic. But at a handful, get replacement cost. You cannot afford to go without it.

Remember the easiest way to think of the value on your policy is that percentage method. Many want to fool themselves into believing it means the first $35k of damages, but that’s not how most policies read.