Insuance on rentals

[Patti Thurman]

In Dayton Ohio. I have 2 rentals combined value is approx 70K . Insurance is currently

replacement cost of 259600.00 with 1000K ded on each. Currently being billed for 

1571.00 annually for both properties. I am being advised this is a good deal from

my insurance agent,, not so sure on this end. Any advice would be helpful.

Thanks

Patti

[Christina Carey]

That is a terrible deal for you, but I'm sure it's great for your agent.

PM me and I can send you a local guy who has programs specific for rental properties, that will likely cut your premium by a third or more - depends on square footage of the properties.

[Lindsay G.]

Hi Patti,

I work for a company called APIA. We offer a program for investors and would love you give you a quote on coverage on your rental properties. I'm available if you'd like to send me a private message - I can answer any questions you may have and/or provide contact information. 

Lindsay

[Jeremy Paschedag]

Is the consensus to insure the cash value?  Or are there better rates for replacement cost? 

[Darrin Carey]

My properties are insured for cash value due to the replacement cost being so high. The cost averages $475 to $500 each per year. As @Christina Carey said, square footage will be a factor along with the market value.

[Joe Splitrock]

I insure for replacement value. My properties are all in the same side of town, so here in the mid-west, I am afraid one twister could come through and take it all out. My insurance rates are less than half what you pay for property worth twice as much. My situation may not be applicable, but still it seems you should shop around.

Just remember if you insure for cash value, you will get a check and will be stuck with an empty lot. 

[Jason Bott]

@Patti Thurman Would you rebuild the property if you had a total loss? If not, you will only get the fair market value of the property at the time of the loss, $35k according to your #'s. 

So you end up paying for the high end coverage but never benefit from it.

Insuring for almost 4x's the market value is high.  Try and negotiate the insured value of each building as low as possible without losing the Replacement Cost coverage.  If you can get each building to $80k each, then you will have a good deal.

[Jeremy Pace]

@Patti Thurman I feel like the premium and deductible aren't quite enough to make a good judgement about whether or not it's a good deal.  It's also necessary to know the coverage/exclusions.  Do you have basic/broad/special coverage?  Also, how much liability coverage do you have per incident/property?

It's a little odd to me that none of the insurance agents in here have asked any of these questions ... I'm hoping they all messaged your inbox.

One last note (hypothetical):

If you don't have replacement cost, and you make a small claim, they won't pay the entire claim if you have a small claim.

Example: if you have a $100k house, you have to insure it for at least $80k in replacement cost coverage.  You have $40k in coverage (because you decide to insure value).  If you have a fire in your rental, and you have a $20k claim, the insurance company will only pay $10k, because to them, you've only given them half the premium, so you get 1/2 half the money.

Ask about: coinsurance penalty (80k of 100k is 80% coinsurance)

Ask about: stated value/functional replacement cost (FRC is better)

you CAN insure for value if your policy explicitly states that there is no coinsurance penalty.

[Jacob Sampson]

I think this has been stated already but I will add my two cents.  I never insure for replacement cost.  I ensure for about what I paid for the property.  If something catastrophic happens then I look at it as though I just sold the property for what I paid for it and didn't incur any transaction costs.  Depending on value of land, after loss of property, I would donate it to a non-profit organization.

[Jay Thoms]

@Patti Thurman

Hi Patty!  

I can appreciate your question.  I was born and raised in the Dayton Ohio area and am familiar with your situation.

Prior to being a real estate agent I used to work for MetLife and State Farm Insurance.  I can tell you there are many variables that can affect your rate.  Some of the most important factors are size of the property and construction type, your credit score, your claims history, age of property and many more things.  I still have a lot of connections in insurance but my favorite is a local insurance broker that I use for all of my insurance.  If my rates ever go up he shops the rates of all the other companies he represents.  I had him switch my policies last year to a good company and saved over 1500 dollars for all of my policies combined.  

If you need his info send me a message.

Best Regards,

Jay

[Joe Splitrock]

@Jay Thoms that is good advice to look for a local broker who has more than one source for insurance. I am in a similar situation with a local agent and he saved me over 20% from the big company I was with. When I left my old agent he seemed mad. I asked if he could match the rate or justify why I should pay more to stay with him. He was a 30 year experienced agent and all I got was dead silence. Basically they were just over priced.

[Jay Thoms]

@Joe Splitrock

Thanks Joe.  Your story is a bit funny how he reacted.  Good luck with your investments.

Jay