Insurance Question
When insuring your properties, do you insure them for their market value or their replacement cost?
Also, what deductable for what type of properties do you have in your insurance policies?
Thanks a lot.
Alex 
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I run a $1000 deductable and insure for replacement cost (which is normally a heck of a lot higher than appraised value).
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Quote: Also, what deductable for what type of properties do you have in your insurance policies?
Not sure I really understand this quesiton. But I get the highest possible deductable that they will write. After all, I would not even consider filing a claim for less than maybe 10k. In FL, your insurance options shrink dramatically when you have filed a claim in the last 3 years. And never even discuss, much less file a claim for water damage - unless it is major money.
$10k! Holy Moly, thats to rich for my blood, but as far as insuring for market value or replacement cost, there should be little question if your talking about residential or small multi's (that's what I'm familiar with) - always insure for replacement cost, unless for some strange reason that I don't know of, the market value is higher. For most small multi's and residential houses, especially older ones in older neighborhoods, anyway, the replacement cost will exceed market value by quite a lot. At least thats been my experience where I live. Z
Just to clarify, my second question is what deductable do you have in your insurance policies? Do you have different deductables for different types of properties?
Thanks all.
Alex
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Mine are $1000. Z
The amount of Ded you take is up to you. How much are you willing to take?
By all means go for replacement cost. Next consideration. All Risk or Named Peril Coverage? All Risk cost a tat more. However, in the event of a loss, with Named Peril coverage the burden of proof for the loss is on you. With All Risk Coverage, in the event of a loss, the burden of proof shifts to the insurance company leaving you in a much better position.
Another factor to keep in mind. Many policies deem the risk to be a "vacant property" after 30 days. In that case, if the property is vacant and you fail to report the vacancy you may have a coverage problem.
Finally all policies have a co-insurance clause and these days they run from 80 to 90%. That means if you fail to keep the property insured to within 80% of it's replacement cost value, in the event of loss you become a co-insurer with the insurance company. This can be very expensive. Have your agent explain co-insurance to you.
One more point. On multi-family dwellings you enter the realm of commercial property. If you purchase a such property and do a rehab. Here's a way you may be able to save some on insurance. Most states have a fire rating bureau. Have your agent check the fire rate on the building. If it's an older building it may have a high fire rate. If you rehab it, you can apply to the fire rating folks to "bust" the rate. 99.9% of insurance agents never think of doing this for their clients.
I had a claim last year due to a tenant caused fire. It paid out 20k. If you think 10k is a lot of money, try having to insure with Lyods of London on each of your deals for the next 3 years.
Simplified definitions of coverage:
"All-risk"---unless peril is specifically excluded, coverage. (check the Loooong list of exclusions, though).
"Named peril"--Unless peril is specifically named, no coverage.
Buylow,
I don't understand how the "burden of proof" shifts.
As for RC vs. ACV (which is technically different than market value). It depends on what you want to become of the property in the even of a total loss (which are rare). RC is less expensive per thousand, but usually more premium as the coverage required is considerably more than at ACV. However, at ACV, partial losses are depreciated...big coverage differance.
Brenda is on the money with higher deductibles. Look at your TOTAL risk (not individual properties) and play the law of large numbers game. You'll be much further ahead long term.