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Updated over 6 years ago on . Most recent reply

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James Free
  • Rental Property Investor
  • Fort Collins, CO
326
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How do we figure out insurance limits?

James Free
  • Rental Property Investor
  • Fort Collins, CO
Posted

I'm interested in starting a discussion on easy ways to figure out appropriate amounts of dwelling and liability coverage to purchase for a rental property in a given area. I don't see a lot in terms of resources for helping consumers do this, other than "use the numbers that insurance companies hand you", which seems like a poor idea. As investors branch out into different regions, it can be difficult to figure out what's needed in a new locality.

What strategies has this community found?

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Timothy W.#3 Off Topic Contributor
  • Attorney
  • Viera, FL
1,569
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Timothy W.#3 Off Topic Contributor
  • Attorney
  • Viera, FL
Replied

What you're looking for is an "insurance to value" calculation.  I've done about 2,000 of them in my career.  It's not a market valuation so it does not rely on your zip code except to the extent that the region of your country may have slightly different labor rates which affects the actual cost replacement value.  MSB is not this report, it's just the acronym of a former company that used to be one of the databases for cost replacement data.  There is more than one database you can use.  I performed cost replacement valuations for a couple clients down here in Florida to show that they were being overinsured for what the policy actually covers (i.e. policies do not cover foundations) and was able to get their rate reduced by giving them their own ITV they could present and negotiate appropriate coverage for.  If you rely on the insurance company to tell you how much insurance you need to buy you may as well go to a listing realtor and ask them how much you should pay for their listings.

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