Insurance Question - West End/Portland

[Allen Jones]

I'm looking for a rental house in the West end/Portland area and I had a few questions about the homeowners insurance. I'm wondering how the rates are calculated. Is it based on the purchase price, square footage or something else. I'm just curious because the prices they sell for are a fraction of what they would cost to replace. What would be a ballpark rate on a 30k property?

Thanks,

Allen

[John Mocker]

Allen,
I had posted this to someone else on BP.  Thought it might help:

"We write with many markets. Most of the better rates are from companies that write the Building coverage on a "Replacement Cost" (RC) basis. It is a better coverage for the policy holder than "Actual Cash Value" (ACV). A policy based on ACV will normally have a lower limit (ACV = RC minus depreciation). RC is the cost to rebuild the structure with the same kind and quality. In a market where rents are depressed, the RC will often be significantly higher than the ACV.

The problem with ACV is that, on a partial loss, the claim, under an ACV basis, has a deduction for depreciation. You will have to kick in for the deductible and the depreciation. If your Rental is in good shape, updated systems, well maintained, etc. the rates from some companies with only RC may be equivilant to others that will only do ACV. I just wrote one in CT that one of our carriers for $400,000 RC was $100 less than the next best rate which was based on $110,000 ACV for the same property."

With a purchase price of $30,000 my guess is the ACV is significantly less than the RC.  Pay attention to the quotes especially the coverage.  The policy form most likely to be used is the Dwelling/Fire form.  That form can have different levels of coverage (DP1 = basic to DP-3 which includes the most coverage).  Also, if the quotes are from Non-Standard (aka Excess Market) companies, there may be more exclusions to the coverage.  The best price may not be the best deal if the coverage is stripped down.