Insurance quote too high?

Question

Hi y'all, we are buying a 4 unit investment in Chicago for 430k, conventional loan with 30% down. I just got quoted minimum coverage from state farm for a $900,000, is this common?. Monthly payment is $450, more than we would like to pay. Can anyone recommend the cheapest insurance quotes in Chicagoland? Someone in another forum suggested asking for a quote with 80% coverage, I am waiting to hear back from the state farm guy. Any suggestions greatly appreciated.

Ryan Kempkens · Answer

@Michael K. I would be very careful with a broker that "rigs" an insurance contract. Keeping your payments artificially low seems great until you need the coverage and there is non because you made a material mis-representation in the contract. The building might never be a total loss but you very well could have a liability claim big enough for the insurer to investigate that.

John Warren · Answer

@Jorge Leon replacement costs are through the roof this year. Most 4 unit buildings are running 30-40% more than they were a few years ago due to the value of construction being so much higher. I would focus on finding a local insurance broker versus going to one of the "captive" shops. I never really waste time with any captive shops since they can only do one thing to lower price which is lower the rebuild value. Then the next year, they will jack that up and I will be right back where I started.

Owen Rosen · Answer

$100-$150 is outdated.  You're going to find quotes more in the $175-$250 range and up.

Jason Bott · Answer

@Jorge Leon I can send you some insurance carriers we use for our Chicago investors.

In regards to the "80% coverage", I believe they were referring to 80% Coinsurance.  When you have this valuation form, the limit of insurance on the policy must be at least 80% of the building's value. If the policy limit you have selected does not meet the specified percentage, your claim payment will be reduced in proportion to the deficiency.

Mark Ainley · Answer

Yep I will DM you now with them and what I am seeing working best for any other investors we work with!

Jonathan Klemm · Answer

Hey @Jorge Leon - It might be worth looking at your insurance as a total package (i.e, car, home, umbrella, etc.) and take that to a broker who might be able to get you an overall price.  That is what I did and I like you also had State Farm.  Whatever you don't skimp out on insurance.

Happy to provide you with my Chicago broker if you'd like.

Also, come check out our meetup on the 19th.  We will have two insurance experts presenting.:  https://www.meetup.com/chicago...

Chris Seveney · Answer

Always shop your insurance. Also remember insurance is based on "replacement value", ie. what would it cost to rebuild. Typically this will range from $100-$150/sf but of course can be much higher depending on where the property is located.

Mark Ainley · Answer

@Jorge Leon State Farm seems to have some of the best rates this past 12 months in the 1-4 units space.  Looks like you are already going that route.  Let me know if you ever want me to DM you my 5 insurance guys we always refer out, like, and trust!

Michael K. · Answer

I'm paying about 2-2.5k / year for insurance on each of my buildings. They are also mulit-unit buildings valued in a similar range as the one you are looking at. I think my insurance broker (AAA) was able to rig it somehow that one is considered my primary residence and the second a vacation home. Your number does seem high to me, so I would suggest you shop around. Feel free to PM me if you need a recommendation.

Insurance quote too high?

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