Property Insurance vs. House Insurance for Rental Units?

[Chris Heeren]

I just recently bought my first rental property - a 3,100sqft duplex for $56K and had some questions while getting it insured. I went through American Family since all my person insurance is through this company and they said that the Actual Replacement Value would be $310,000 based on square footage. I told them that was silly and wanted to only insure it for $80,000 (The value it appraised for). They told me it was a catch 22 scenario where they could not physically insure the place for the ARV as this was more than twice the purchase price, however they also couldn't insure it for $80,000 as this was too far below the ARV value? They came up with insuring the property (land) itself for $150,000 for about $200/yr (I see most people pay around $800 per year) And that this did not include liability insurance, however since I had a 1M personal umbrella policy that this covered up to 5 rental units as well. He ensured that the house would be covered for the $150K amount if it was burned down and that I would not have to build back a 6 bedroom house in it's place.

Does anyone know what I'm getting into and what do I need to do to get properly insured in case of an extreme accident? Something just doesn't add up here and I'm sure people insure $50K buildings all of the time.

[Tim Norris]

Coverage at RC (Replacement Cost---gives you the ability to recoup the initial depreciation that is levied against the settlement by simply completing the repairs) that waives any co-insurance requirement may be the best of both/all options, too. There are carriers/Programs that offer this, but not all agents have access to them.