Newport Beach, CA · Member since 2012 · 49 posts · 2 votes
Hi everyone,
My father recently gifted me the house I grew up in, and I found out that there is no insurance on it. I am trying to figure out what type of insurance to get given that I am currently living in it but will likely begin renting it out in a year or so. Down the line I would like to do a 1031 exchange. I'm not at all attached to this area or the house itself and would, in the event of something happening, just want as much of the value of the house back. I;m in southern California and Zillow estimates the current value to be at 750k.
Thanks so, so much for any guidance. I have no background in real estate so all of this can be a tad overwhelming at times. :)
Why not insure the house yourself and also require renters to purchase renters insurance. Thats my first though but im sure someone else will know more.
Cagney Moreau, Yes, I will definitely get homeowner's insurance but am wondering whether to get a replacement or cash value policy. When I rent it out I will definitely require my tenants to get renters' insurance as well.
Dina Harleth
I would hurry up and get it insured asap, as-in, calling right now and buying a policy.
On the subject of how to insure, I am a cash value fan.
Here's a link to a pretty good thread on it:
http://www.biggerpockets.com/forums/95/topics/76193-actual-value-or-replacement-cost
In my experience, the people that like them are insurance agents. As an owner, they don't make sense to me. I have gone through a total loss and have a friend that lost 8 units in Joplin a year ago. We both had cash value and it worked out great. He's told me sad stories about people with replacement coverage. Somehow, if you have replacement coverage, and chose to NOT rebuild, the insurance company can give you a reduced payment (I heard 80 or 90%) of the loss.
There's some good info in the previos thread.
Buy insurance today. You can always change the policy later.
Ed O., Thanks for the advice. It is pretty scary that this place has no insurance on it. Thanks for the link; I did come across that one and some other previous threads when I did my search. I read elsewhere that the risk with cash value is that you don't recapture the depreciation.
I will heed your words of wisdom and get a policy ASAP. How easy is it to change policies down the road?
Buy homeowners on it if you're moving in soon. If not, you need "vacant house" insurance which is not only expensive but hard to find. Once you have tenants, switch to a landlord policy.
Thanks, everyone. Would anyone be able to recommend to me a good insurance broker? Also, how do I figure out if its worth getting additional coverage for earthquakes and floods?
Jon Holdman, I'm in Huntington Beach, CA. I just called AAA and they offer guaranteed replacement coverage. They require an inspector to come out first; is that standard?
But wait. If she puts cash value on it, then doesn't mean if there's a fire that costs about 50k to fix, she may only be getting 30 or 40k of that because the insurance company will deduct for useful life of things?
i.e. If carpet is 5 years old and they expect it to reasonably last 7 years, you may only get 25% of what it would cost to re-carpet.
Isn't that a huge risk for out of pocket?
I wouldn't think she'd want to risk having to come up with anything out of pocket if there were a fire or something. I'm guessing california value is mostly in the land but still....... Wouldn't you have to recommend replacement cost?