Contractor · Oklahoma City, OK · Member since 2018 · 38 posts · 11 votes
We have just purchased our first buy and hold. We are in process of completing renovations and will put it up for rent soon. I saw that several others recommend Replacement Cost Coverage vs Actual Cash Value Coverage, however, our property value is around 55k and we most likely would not rebuild. It is in a class C neighborhood. One insurance agent I spoke to said to get the highest possible liability coverage ($500k.) Another quoted me for $25k and said via email, "I would not let this worry you. In 20 years of selling insurance we have never paid a single liability claim on a policy. I am the largest independent insurance agency in Oklahoma too and never once have they paid a claim. To pay a liability claim you have to be found at fault or liability for a tenant's loss. The burden of proof is so high that this never happens."
Real Estate Broker · Tulsa- OKC Oklahoma · Member since 2017 · 868 posts · 801 votes
6y
I operate in Tulsa and OKC. We have policies on our homes with $1M in liability per house. We also require renters insurance from our tenants which adds another layer of $100K liability for certain tenant caused damages such as they start a fire.
Insurance · Garden Grove, CA · Member since 2020 · 36 posts · 10 votes
6y
@Cesar Egas it seems you have gotten the full spectrum of answers. That has to make it brutally difficult to make the right decision.
Insurance is essentially a hedge against risk. The more coverage you have (and in turn the more premium you pay) the more you hedge against risks. Your choice of insurance really comes down to your own risk-tolerance. Each agent will give you a different answer and have their own stories of why you should or why you shouldn’t have certain coverages.
Real Estate Broker · Tulsa- OKC Oklahoma · Member since 2017 · 868 posts · 801 votes
6y
I operate in Tulsa and OKC. We have policies on our homes with $1M in liability per house. We also require renters insurance from our tenants which adds another layer of $100K liability for certain tenant caused damages such as they start a fire.
Rental Property Investor · The Vampire State · Member since 2013 · 2k+ posts · 2k+ votes
6y
I do ACV in my C-classes. I would not rebuild, either. Just be aware in the case of a partial loss, co-insurance may be a factor and not pay the entire claim for repair. This is something I am not personally worried about as I have a very high deductible and would not likely file a claim, and the ACV is much cheaper than Replacement. It's all about your risk tolerance.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
6y
Do not do rebuild on a 55k house that’s moronic . Just insure it for The cost of what other properties in the area go for so if it burns down you get enough to buy another local rental house that can bring in the same income . Do get liability I get Atleast 100k per unit on the building . Do maintain your property and quickly fix stuff that’s a potential safety issue
I responded to Miranda's post on this but essentially I do replacement cost because I don't want to have to worry about the out of pocket cost to replace items if something is catastrophic but not a total loss. If I had larger cash reserves and/or more properties, I would consider cash value. However at this phase of my business a huge out of pocket expense like replacing siding, roof and decking from a major storm would be enough to really hinder my growth for several years.
There are MANY different ways to insure your property but the one area I would not skimp on is the liability portion. In most cases, you are splitting pennies to carry low liability limits. Then you take into account who holds the deed on the property(personally or in a business entity) and you are looking at protecting your individual assets or your investment.