Actual Cash Value or Replacment with rental insurance?

3 Replies

I'm currently in closing for my first property and am looking for insurance for it. I'm trying to decide if I should get ACV insurance and increase the cashflow by $20 a month or so or if I should get replacement. What does everyone else do?

As someone who sells home insurance and is closing on my first house hack, I would never feel comfortable not having replacement cost. To me, the increase in your premium is well worth the peace of mind knowing that you're covered if something happens. 

I only have two rentals at the moment, but both have taken on water damage over the last 5 years.  One was nearly a gut remodel of the whole home.  Another thing to remember is to get enough coverage in the worst case scenario.  We did not on that property, and I ended up doing some of the work to keep costs down.

But my vote is for RCV as well.  Like @Brian Medansky said, peace of mind is well worth it.

@Eric H. if the property was built in 2015, you could go with an Actual Cash Value policy and have little or no penalty.  But if the home is 100 years old, your going to be getting your claim payment reduced by 50%-75%.

So with a $50,000 claim, you'll get $12,500-$25,000.  If your ok with that payout in exchange for the increase cashflow, then go for it.  If you dot have the extra $25k in reserves, or don't want to risk the $25k, then go with a Replacement Cost policy.

I have client go both ways depending on their specific situations.