"How to insure rental properties for actual value"

[Trisha Suek]

I am a landlord with rural (read low value) apartment buildings which are in reality worth a fraction (like a quarter) the replacement costs computed by insurance companies. So the problem I end up with is for example a 1m building where every insurer either declines to insure it or will only insure it at like 4m. This creates exorbitant insurance costs. Does anyone have any advice on how I can get a policy that is based on the actual value of the building?

[Andrew Bish]

Have you reviewed the RCE run by the agents? While you should be able to find an ACV policy with a broker who has access to the excess and surplus markets, replacement cost is not market value. It is the cost to pay people to pull the debris of the land and rebuild the structure in like kind and quality. While the real estate value may be lower in a rural area, it is more expensive to send materials and laborers there. Also materials used and age of structure impact the overall replacement. 

Chris is right to point out the increased out of pocket cost. When insuring your structure below the estimated replacement cost (or as low as 80% depending on company), the insurance company expects you to take on a portion of the cost in the event of a claim. This is usually called the co-insurance clause. This reduces your payout based on percentage coverage carried and full replacement cost.