Pros and Cons of Cash Value and Replacement Cost Insurance

[Anthony Gayden]

I am in the process of buying my sixth investment property. All of my other properties I have insurance coverage for replacement cost, but on this property I am considering getting only cash value coverage. What is generally recommended for landlords? The cost savings is about $200 a year. 

[Todd Rasmussen]

@Anthony Gayden

Cash value will pay you the depreciated value of property you own that is lost due to a covered loss. Replacement cost will pay you the cost to actually replace the property you lost in a covered loss. Both of those will pay up to a maximum of your policy limit. As as example lets assume you have a washer/dryer in the unit.

                               Cash Value         Replacement Cost

Policy Limit             2000                 2000

Purchase Price         1000                 N/A

Life Remaining         20%                   N/A

New washer/dryer   N/A                   1500

Policy Pays              $200                  $1500