Risks Of Minimal Insurance On A Large portfolio
I own over 100 rental properties financed across many loans. My bank only requires I have insurance for these properties without stipulation as to the level of coverage. I have 80% co-insurance with replacement cost value. I recently increased my deductible to $25,000 to lower the premiums. I am considering eliminating the "building ordinance and law" coverage which would save a substantial amount on my premiums. I am also considering switching coverage to actual cash value. I know everyone's financial situation is different but I am curious if anyone has an opinion on the financial risk of not only the high deductible but switching to actual cash value and on excluding the "building ordinance and law" coverage.
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Zachary — with 100+ properties and 15 years of no claims, you've clearly got a well-managed portfolio. The fact that you're thinking about this strategically instead of just blindly paying premiums puts you ahead of most investors.
A few thoughts from someone who works with large-portfolio investors on the insurance side:
The $25K deductible move was smart — at your scale, you're essentially self-insuring smaller claims anyway. The premium savings over 100+ properties adds up fast.
On building ordinance and law coverage: I'd be careful dropping this, especially on older properties. If you have a major loss and the city requires you to bring the rebuild up to current code, that cost can be 20-30% above the dwelling replacement value. On a $200K property that's $40-60K out of pocket that wouldn't have been covered. One incident could wipe out years of premium savings.
On ACV vs replacement cost: ACV on a 15+ year portfolio means heavy depreciation on roofs, HVAC, plumbing — exactly the things that get damaged in claims. Tony's suggestion about agreed value is solid if your carrier offers it. Best of both worlds.
Here's what I'd suggest thinking about: instead of cutting coverage to build cash reserves, consider building reserves in a vehicle that also serves as a protection layer. I've seen large-portfolio investors park capital in properly structured whole life policies — the cash value grows tax-deferred, is accessible via policy loans in days (no bank approval needed), and the death benefit adds another protection layer for your family and business partners.
The math can work well at scale: the premium savings you're chasing by reducing coverage might be better achieved by restructuring how you hold your reserve capital, while keeping your coverage intact. One bad claim on a property with reduced coverage could cost more than years of premiums saved.
Just something to model out. At your portfolio size, the risk-reward of cutting coverage gets asymmetric fast.