Thoughts about Property Insurance

[Amy Little]

I have 2 townhouses and a duplex. Although I have property, I'm still very much a newbie trying to figure everything out. On each property, the insurance I maintain is what the insurance company has quoted me for replacement value. However, financially, I am not in that much on each property.  For example, insurance on duplex is for $150K for rebuild value costing $1400 annually; my personal financial investment is only $23K.

How do landlords assess the type of insurance coverage for their property? (i.e., only insure for the amount of money you have in the place OR for the replacement value). What are the pros/cons?

Thank you

[Jennifer T.]

I want my properties insured for at least their market value (not including land).  Which may not necessarily be their replacement value.  However, if you insure for less than replacement value, you could potentially have the insurance company come in and start nickel and diming you, if there is an incident.

It's been a long time since I thought about insurance, so I think I'm giving you valid info.  But take it with a grain of salt!

For example, let's say your roof is destroyed because a tree falls on it.  Your adjuster says it is $10K to replace your roof.  With replacement value insurance, you'll get the full $10K.  For "non" replacement insurance (sorry I forget the term! Actual value?), the adjuster will tell you it is $10K to replace your roof.  Buuuuttt...ya know...that roof was already halfway through its life expectancy, so we're only giving you $5K.  In other words, they will "pro-rate" the amount given for repairs needed.

I'm not necessarily saying that is a bad option for insurance.  That's actually the type of insurance I tend to buy.  But it's something to consider.

If the property is "totaled", like it burns to the ground.  You'll get the full amount of whatever you have it insured for with either type of insurance.

However, also keep in mind that your property insurance will include liability (I'm assuming).  Let's say it includes up to $500K in liability.  That liability portion of the insurance will be about the same whether you have the property itself insured for $1K or $1M.