INSURANCE: What type of insurance do I need to carry?

7 Replies

Thanks everyone. @Pili Yarusi , give me a call or e-mail and I'll be glad to discuss your options.  We regularly give the three basic options for coverage that you will hear debated on BiggerPockets.  Replacement Cost, Actual Cash Value and Functional Value.  To break down the split once people see the cost/benefit.  About 39-40% Replacement, 60% Actual Cash Value and about 1% functional value.  

My contact info should be below.

Replacement Cost Value will pay you the full value to do the work to repair your building.  Actual Cash Value will only pay you the depreciated value with no opportunity to recover the depreciation after the work is completed.  

I am working with an investor right now on a fire claim in one of his apartment buildings.  He's insured with USLI.  Their adjuster agreed to our estimate of $52,000 in damage; however, my client has an ACV only policy and USLI is depreciating it $8,000.  My client has a $5k deductible.  So, after depreciation and deductible, he is going to get a check for only $39,000 on a $52,000 claim.  If he would have had a Replacement Cost Value policy, USLI would have paid him the $39,000 and then once the work was completed, he could have recovered the $8k in recoverable depreciation from USLI.  

When deciding between RCV and ACV policies, you have to ask yourself three questions:

  1. Can I get the work done cheaper than what the estimate would likely pay?
  2. Can I afford to make up the difference between the ACV and RCV?
  3. Does the difference in premium make sense when all things are considered?

Tavisha Grant, Public Adjuster, Property Claim Adjusters, Phoenix, AZ