I'm in the process of buying a triplex in the Hudson Valley and insurance quotes are coming in between $2000-$2500/yr (current owner pays $2400). This seems crazy high to me, as I insure my Portland, OR duplex for $548/yr, and it's worth roughly $250k more (market value) than this place in the HV.
The insurance broker I'm speaking to claims I have to get a full-repair-value policy (not a market-value policy), and estimates for a rebuild are coming in between $360k - $800k. Obviously, it would make no sense to rebuild at that cost if the final (new) building would be worth no more than $300k on the market.
I read this excellent post by @Paul Caudell that helped me understand the terms a little better:
So I guess what I'm looking for is an RCV policy that insures me up to the market value of the property, not the estimated rebuild cost of the property. But I'm not sure if NY state allows this?
Anyone have any experience shopping around for rental property insurance policies in NY state?
Thanks in advance for any input!
For what its worth, I just paid $2250 for a 4 unit in Maine that covers a replacement cost of 584k. Appraisal came in at 350k. Initially the broker gave me a quote of 2850 and I told her that wouldn't work, so she tried a different company. I don't know if it's a good policy or price, but it allowed me to close on the property and I can always shop it around in the future when I'm not up against a tight deadline.
@Megan S. You want to find a company who can offer an "Agreed Value" policy. Even then, the terms of the agreed value will still have some minimum rebuild cost per sq/ft, most likely $75 or higher.
Not many insurance companies do what you are asking as they would be taking on more risk, but collecting less premium.
Jason, I don't think I understand your statement about insurance companies taking on more risk for less premium. Where does the increased risk come in? If they're insuring me up to, say, $100k instead of $500k, doesn't that essentially "lower their risk" by $400k?
@Megan S. In the case of a total loss, the risk would be less. But when you have a property claim that is a partial loss, which is 98% of the time, there is more risk.
Assuming the building is 2500sq/ft, and the contractors cost to repair the damages is $200 per sq/ft. Total building replacement is $500k
If the insurance company writes a replacement cost policy @ $100,000,they are offering to pay out $200 per sq/ft for the repairs, but only collecting rate at $40 per sq/ft ($100,000/2500 sq/ft).
So unless the insurance companies RC rate for $100,000 is 5x's the $5000,000 rc policy rate, they are taking on more risk.
Does that give you the answer you were looking for?
Yes, that helps clear it up. Still seems like they could offer something akin to what health insurance companies provide, with itemized “max amounts” that would allow a buyer to select the level of risk/reward that works best for them... ¯\_(ツ)_/¯