Rental Property Insurance ACV vs RC

[Lisa Yang]

Hi BP,

I am purchasing my first rental home in Madison Heights, MI and was hoping to gain some knowledge on insurance policies.

The purchase price of the house is 115K and I will owe 75% (86K) to the mortgage company. The appraisal came back at 120K. I currently have an ACV insurance quote for about $56 per month for 115K Dwelling. Do you think this is sufficient or do you think it would be smarter to go with a replacement policy that costs about $200-300 more per year?

Thanks in advance for your insights!

[John Underwood]

You want your poilcy to cover the amount needed to rebuild. You can deduct the value of the land as this would not be damaged by fire flood etc.

So could you rebuild for 115k or would you be happy with a check for this amount and walk away from the property and buy something else? If yes to both then this should be good.