How much insurance to have?

[Nathan Emmert]

So I'm all set to close on a rental property next week, my first. In calling around for Fire/Dwelling quotes the numbers I am getting vary wildly, from $340 a year up to $800 a year. While I expected some variation, that amazed me.

In looking further, here's what I found out... the lowest simply insured me for the appraised value (I told them $85k even though I was paying $72k)... the next insured at $100k stating that was their minimum... above that was a quote at $160k because that was their estimated replacement cost on the property... still another had an estimated replacement cost of $200k! Holy cannoli! For $200k I might light the fire myself, geesh!

So what do you insure your rentals for? I'm torn... as an investor, I am not emotionally attached to the house (beyond it being my first, you know men and our firsts!)... it's an investment with a projected return and risk level. I am inclined to be insured to the point I could recover those two things, i.e. buy another home with equal potential and risk. A policy for the appraisal value should in theory do that. Of course, having a rebuilt rental would give me a ton of value. I have to believe a 2011 home that looks exactly like my 1908 home is worth more than my 1908 home... right? In that case, having the extra insurance would be nice as I would see equity out of the situation.

At the end of the day, I can pay an extra $15 a month and cover myself better... I just hate to get into the habit of casually throwing away money without reason. So I figured I would ask the powers that be here at BP, how much insurance do you carry on your investments?