How much should I pay to insure a $40k house?

Question

I'm in the process of buying my first house, which is a $42k SFH that is in great condition.

I called USAA and they quoted me a $140k rebuild cost, which I thought was extreme.

Their rates were $910 for 1k deductible and $503 for $10k deductible. These don't seem worth it for a $40k house, though a $1M liability coverage is included in both.

So, your thoughts? Which of the two would you get, if either? Should I shop around for rates, or is this fairly normal and to be expected?

Sylvia B. · Answer

Tell them you don't want replacement insurance and that you only want to cover the cost of the house. If they won't sell you the insurance coverage you want, go to a different company.

Tyler D. · Answer

It's a cash deal.

$300 is very reasonable. Does it come with liability coverage? Who did you go through?

Matt M. · Answer

@Tyler D'Alessandro

Man that’s a lot!!

I have 2 houses with Allstate. Basically identical houses, replacement cost $220k, $1000 deductible, I pay $1020 total for both the policies. But... I do have my personal residence and cars with them also so there is a discount there.

Caleb Heimsoth · Answer

@Tyler D'Alessandro if you have a lender you’ll need replacement cost, which is what you’re being quoted.

If this is a cash deal, get what’s called ACV, actual cash value.  Due to the depreciation you’ll want coverage that’s about double your money into it, but it’s very cheap.

I have around a 75k ACV policy for something like 300 a year

Dennis M. · Answer

I own many  houses like this . The insurance company will scare you into taking out more coverage than you need . My advise is Insure it for only what you could theoretically buy another one for ,In the same general area of equal size and quality ..do not insure for rebuild cost . That would be dumb on a house under 50k  , normally that’s like a 10-20% higher number than what you paid for it if you got a deal when you bought

Syed H. · Answer

You have to have insurance.

Rebuild cost has nothing to do with value. $140k isn’t a lot of money to rebuild a house. It probably is about right.

Go with the high deductible.

Theresa Harris · Answer

I'd call around and if you don't get a lower price, go for the one with the higher deductible.

Matthew Paul · Answer

The land has value , so it may only be a 30K house and 10K of land . Call other insurance companies . Remember the policy also covers liability

Tyler D. · Answer

I plan on keeping it for the long term, at least 10 years. I'm putting aside money for repairs anyway, so I don't see the need to pay this much for insurance to say, fix a roof when I could've paid for that myself. Unless the house is totally destroyed, I don't think it would be worth it.

And even IF the house is totally destroyed, I don't see why I should be paying insurance for a $140k rebuild when I can buy the same for $40k down the street.

Theresa Harris · Answer

How long are you planning on having it?  How often do you use your insurance for repairs?  I'd go with the higher deductible.  The big reason for insurance is liability.

How much should I pay to insure a $40k house?

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