Property Insurance in Class C areas

11 Replies

I've been running the numbers on various properties in Toledo just to get a feel for different scenarios. When I get insurance quotes in lower income areas around Toledo, rates seem to go through the roof! I'm talking over $4000 premium on a $50,000 asking price property (4-plex)

Is this typical to see for higher risk areas? Would I be better off talking to local insurance agents to get more accurate pricing? (Right now I'm just going to policygenius.com to get ballpark quotes).

Anyone have rules of thumb for what's reasonable to plug in for landlord insurance based on property class, SF, # of units, price?

@Douglas Furia

I would speak to a couple independent agents in the area that carry 15+ carriers. If there are no claims in the last 3-5 years you might be able to find a better rate. Also, if it is currently occupied, make sure they know.

Douglas,
See if you can find out from local agents the factors that are driving up the rates on these properties.

Could have to do with:
1. Age of the building
2. Lack of updates to the
Electrical, Plumbing,
Heating, Roof,...
3. Condition of the property (run down exterior, Yard has trash/overgrown.
4. Knob & Tube/ Aluminum wiring
5. Flat roofs
6. dogs on the prohibited list
7. lack of lead safe certification

These and other factors can cause a problem with many companies underwriting guidelines.

Find out what is a problem can help you narrow down you search.

@Douglas Furia - Hi Doug, are you looking to price replacement policies or ACV?

I have a ton of insured single family and small apartment complexes in the lower end areas of Toledo, but all of them are insured as ACV...no one (in their right mind) rebuilds in Toledo after a total loss event. I insure my properties for about 2x the purchase price with a hefty liability rider and rent-loss coverage for $450/year, duplexes $700, 4 units $900, 6 units $1100...naturally I have enough its a commercial policy.

I can recommend some agents and companies if needed...been with the same agent since I started in 2009.

@Andrew Fidler just curious why is an ACV check for $10,000 better then a rebuilt house?

Is it just the math that you’ll pay more over the years in replacement cost premiums?

@Michael P. - it's the math that I've used two times so far in Toledo...

I buy a property for $25k (during the recession, they are now $40k) and rent it for $700.

When the property burns, I get a check from the insurance company for $50k PLUS 6 months of rent loss coverage ($3500 which essentially covers my deductible) PLUS $10k in demolition cash which pays to demolish the house and I have a grassy lot I sell for $100.

Turn around and buy two more houses, ensure they have ACV coverage and hope the tenants smoke in bed.

No one who can do math would rebuild a property in a $40k neighborhood...$150k build would be worth $70k when finished. (Then again we have a lottery so clearly folks don't handle math well) :)

Originally posted by @Andrew Fidler :

@Michael P. - it's the math that I've used two times so far in Toledo...

I buy a property for $25k (during the recession, they are now $40k) and rent it for $700. 

When the property burns, I get a check from the insurance company for $50k PLUS 6 months of rent loss coverage ($3500 which essentially covers my deductible) PLUS $10k in demolition cash which pays to demolish the house and I have a grassy lot I sell for $100.

Turn around and buy two more houses, ensure they have ACV coverage and hope the tenants smoke in bed.

No one who can do math would rebuild a property in a $40k neighborhood...$150k build would be worth $70k when finished. (Then again we have a lottery so clearly folks don't handle math well) :)


100% agree with this.

Take the money and buy another property or properties.

It doesn't make sense to re-build.

Knock on wood it hasn't happened to us or any investor thus far.

Now watch, after this post a house will burn down lol

Much success

@Andrew Fidler Following up on your initial comment - what companies/agents would you recommend getting in touch with? For ACV did you have any problem getting coverage for double the purchase price? Are insurers willing to do that even though the market value is 50% of the coverage?

@Douglas Furia - Hi Doug, I use a local agent here in Toledo - same guy for going on eleven years. His agency uses a range of insurers so I have been fortunate to be able to shop multiple over the years...Auto Owners has been my best experience so far. (I don't think posting the contact info for an unaffiliated agent is legit, anyone is welcome to message me for contact info)


ACV for double the purchase price is a misnomer my friend...my ACV is truly a number my agent recommends as being the intersection of increased coverage for minimal price. I have many, many properties purchased for under $10k that are insured for 10x that amount. I would definitely agree that insurers are annoyed to cover the property for such a ratio but isn't that the standard for American replacement insurance (market value is sales price if sold...replacement value is the construction value to rebuild...ACV is a hybrid of the two).


To compliment your question - I have had 3 claims in 11 yrs that were total-loss events and have come to find that with each major claim you run a good chance of not being renewed by that carrier.

Hope this helps, I am unsure of the metrics that go into insurance coverage, that's what I rely on my agent for. You just need to focus on someone who understand rental coverage. 

Good luck!

Okay, I’m curious as to what ACV means. In my neighborhood, rebuilding isn’t even allowed because of current building codes. Yet every insurance company makes me insure it for replacement value. I’ve even argued the point! Since I’m an out of state landlord, the estimates were higher as well. 

Renee F. - most insurance companies will make you insure at their estimated replacement cost, but not all. If you have 1-4family properties I can insure anywhere from your purchase price up to the replacement cost. It can save you a bunch in premiums. Let me know if you want to look into it further.