Creative Insurance ideas needed

1 Reply

I purchased a property that is all one lot, but has a house and an automotive shop on it. The house is zoned residential and the shop is grandfathered as commercial. I have insurance separately on both. I have leased out the house and shop, and recent commercial appraisal came back at 525k. I have used all cash and now am going to take a $350k mortgage to recoup my money. Bank is telling me I need a $350k insurance policy to cover the property. My current policy only covers rebuild cost of 250k. Insurance agent is having issues finding a policy that will inflate build cost to match my commercial income based appraisal. Are their any commercial type policies that can handle this situation?

I found that out when trying to reduce my insurance on a property that had to have flood insurance, in my case I was able to reduce my costs by lowering my coverage. The mortgage company always wants you to have enough insurance to cover the amount they lend to you, so each year you can lower your coverage based on how much you pay off. Keep in mind this is not always a good practice and you should always cover for the cost to rebuild the structure. My suggestion is to get someone, an appraiser or Contractor to give you a current valuation of what it would cost to rebuild the exact same structure today, it will cost you some money to do this but may help you, the coverage you have now may not be enough to cover today's cost if you took the policy out years ago. The new cost to rebuild may be 350K, which would satisfy the mortgage company and you could justify the change with the new valuation.

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