homeowners insuance on duplex

[Heather K.]

Hello all,

I am purchasing a duplex in Minnesota for $90k and the appraisal value is $100k.  I'm working on getting insurance but the companies I've called want to insure it for the replacement cost of $340k.  I really don't want to pay the premiums for that and looking for an insurance company that will allow me to insure for the value, not replacement cost.  Does anyone know a place in Minnesota that will do this?

[John Mocker]

Heather,

Following what Jason Bott explained and looking at the numbers you gave, I would estimate that the depreciation is somewhere in the 70% range ($100k depreciated value vs $340,000 Replacment).  That means you would be facing a 70% reduction in your claim.  For $100,000 in damage you may only be paid $30,000.  That is a lot to come out of pocket.  

Sometimes, going with very high deductibles on a Replacement cost policy can get you closer to the premium you can live with.  Have them quote $5,000 and $10,000 as an alternative.  There you would get $95,000 or $90,000 on the $100,000 loss.  The downside of the high deductibles comes if you have multiple losses.