Landlord insurance. Just loan value or replacement value?

Question

On "landlords insurance policy", should I opt for a loan value only amount or complete replacement value.   Of course,  big price difference between the two.  The home I am insuring is 60k.

My question is, if I opt for loan value only and the house burns down,  yes the loan is paid for but what do you do then to the house?

If I opt for replacement value,  would it be worth re- building the entire house.

Broad questions,  but I wanted to see what the seasoned investors do for their properties?

Thanks.

Thanks

Angy Hg · Answer

I don't have an answer, but like the topic. If someone could elaborate why it's important to have a landlord insurance that would be great. I'm considering buying one. TIA

Kat Rathell · Answer

I am equally interested in the correct answer. But here are a few things to consider:

1) like you said, if the house burns down, the loan is paid, but how much will it cost you to remedy the burnt building? Debris removal, clearing the site, excavating the basement and filling it, etc. You will have possession of a burnt building and still owe taxes and fines and fees. Will you be in a position to shoulder the related expenses?

2) is if you are going to want to grow equity/rehab and then cash out refinance at a higher dollar amount out of this home, your new lender will want the entire higher amount insured.