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Updated about 3 years ago on . Most recent reply
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homeowners insuance on duplex
Hello all,
I am purchasing a duplex in Minnesota for $90k and the appraisal value is $100k. I'm working on getting insurance but the companies I've called want to insure it for the replacement cost of $340k. I really don't want to pay the premiums for that and looking for an insurance company that will allow me to insure for the value, not replacement cost. Does anyone know a place in Minnesota that will do this?
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Heather,
Following what Jason Bott explained and looking at the numbers you gave, I would estimate that the depreciation is somewhere in the 70% range ($100k depreciated value vs $340,000 Replacment). That means you would be facing a 70% reduction in your claim. For $100,000 in damage you may only be paid $30,000. That is a lot to come out of pocket.
Sometimes, going with very high deductibles on a Replacement cost policy can get you closer to the premium you can live with. Have them quote $5,000 and $10,000 as an alternative. There you would get $95,000 or $90,000 on the $100,000 loss. The downside of the high deductibles comes if you have multiple losses.