I'm closing on a 6-plex in Des Moines, Iowa, this November!!! Built 1890. Older roof. All units on separate meters. Seller has done a good job of keeping up with electrical, plumbing, fire safety, HVAC and general updates. My insurance agent that I've used for primary, auto, and my SFH rental has just quoted me for it. He's an independent broker and the best rate/coverage he found is 3400/yr paid in full, 3800 if paid monthly. I feel he acknowledged that the rate was a bit high. 500k of building coverage. Deductible isn't too low. I'm paying 194k for the unit. Replacement value probably doesn't need to be 500k, but even if we dropped it, the rate is still high. Does anyone have a good insurance provider that they can recommend that offers policies in IA? And are there any endorsements I need to ensure are part of my policy? Thank you!
Arcana Insurance or NREIG Insurance
yea that seems high, though not as outrageous as you may think. We had 4200 on a 12 unit with two commercial units and 10 residential, at the time our only building in MA. Replacement value somewhere around 1M. Not sure what you have for wiring etc?
As the OP stated, the rate is higher, but not ridiculous. Quotes for this property should range between $2500 & $5,000 based on the age of the electrical system and roof. IA has had a lot of Wind and Hail issues the last few years and that has driven premiums up.
I'll drop you DM with some of the insurance carriers our IA clients have been using the last few months.
@Joseph Lyons you will definitely need to start shopping around on the insurance front now that you own commercial. Most of the agents out there are not set up well to handle commercial. Also, get ready for some sticker shock over time as commercial real estate insurance has been going up the last few years. In my area here in Chicago, I had an insurance policy go up around $1,000 per year on my 6 unit in Cicero. The building has brand new electrical that I put in and has mostly been replumbed. It is a solid brick building, but the replacement cost shot up due to the change in supply chain and construction costs.
Be wary of dropping the Replacement Cost (RC) coverage. If your policy changes to Actual Cash Value (ACV) the overall limit will be lower and the premium should also come down. The problem is in a partial loss they deduct depreciation so you do not receive the full claim amount. For example if the RC is $200,000 and the ACV is $100,000 the building has depreciated by $100,000. The percentage of depreciation is 50%. You can use that 50% as an estimate of what will be taken off a claim (Insurance Company Adjuster is the only one who can determine exact payout). So for a Loss that is $50,000 after the deductibe, you can estimate you will get back $25,000.
Originally posted by @John Mocker :
The problem is in a partial loss they deduct depreciation so you do not receive the full claim amount. For example if the RC is $200,000 and the ACV is $100,000 the building has depreciated by $100,000. The percentage of depreciation is 50%.
That is the problem indeed. I’m not against taking risks by any means. It does worry me however to buy the building for 200 and to know that the actual cash value of the building is maxed 275. I’m going to be adding tens of thousands of dollars in updates to the building. Also, I wouldn’t have bought the building for 200 if I thought it wasn’t worth more than 200. So a number like 275 as the ACV for the building doesn’t sit well with me.
If you do end up going with ACV coverage talk to the agent on how often you should amend the limits as your updates will change the Actual Cash Value upward.