Insurance - Replacement Cost well over market value

[Edward Burke]

 I have two properties in escrow in Saint Louis City. They are both four family properties in desirable locations (quality tenants).

The purchase prices are $349,000 and $290,000.  However, as these properties are all brick construction, the typical insurance quote provides astronomical replacement estimates (~$1M each).  I want sufficient insurance, but if something catastrophic were to happen I would construct under more modern building methods. Specifically, I would use wood construction with brick veneer. This is the method of choice for new construction in St. Louis. The goal would be to maintain the curb appeal / authentic look, but at a much lower replacement cost.

Thus, I'm looking to find an insurance agent / receive quotes that understand this dynamic. It makes no sense to me that I would insure a home from $1M, when the market value is $300K. Let me know if you think you can help, and I would love to discuss options available.

I'm planning to buy 3 more 4 family units this year, and will continue to buy multiple properties a year for many years to come. As such, it's important to me to find a solution to this problem, and the status quo of over insuring these properties just doesn't work for me.

Thanks in advance for your help!

[Jason Bott]

@Edward Burke

What you are looking for is an Insurance Policy that replaces the Coinsurance clause with the Agreed Value clause.

This policy gives you the ability to insure a building for less than the Replacement Cost, without being penalized for not insuring 100% of the Replacement Cost.

Most companies do not offer this coverage, which is why your not getting great responses to your request.

Also, if your calling the companies you list above, they are not players in the commercial Insurance space, and the agents don't have the ability to craft a policy to your needs.

There are several insurance carriers that can do this.  I'll send you some additional info.