Question on property insurance type

[Andy Sabisch]

Quick question . . . . for rentals, would you select a policy that is based on the replacement cost or the actual cash value?  Obviously the replacement cost on an older structure is 2X or better what the property might be worth and as a result 2X or better what the premiums are for a policy that is based on ACV but is the difference worth it and if so, why?

We have some of both (going through year end paperwork) and wanted to see if what we are spending is justified or can be leveled out possibly saving some money in the process.

Thanks

Andy

[Jason Bott]

@Andy Sabisch  to add to @Ryan Wakely comments, here is a common claim example I use with clients.

You have a single family with a roof that is 15 years old, with a 30 year life expectancy.  The roof still works but it's Actual Value is 50% of the replacement cost.  Let's say it cost $10k to replace new.

A Replacement cost policy would pay $10k less your deductible, while the ACV policy would pay $5k less the deductible.

Every part of a building has this type of valuation calculated when there is a claim.  Hope that helps put it into perspective.