What is the best way to determine how much insurance I should carry on a 6 unit apartment building?

In General Area - Asked by Christopher Z. - Nov 3, 2010
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Answer(s)

Steve M.
Owner/Investor
Plano, TX

That is an interesting question.
I would say that my insurance policies are normally directed to cover actual construction and demolition costs to rebuild and typically based on standard construction cost indexes for the property type and area where the property is located. Balance that against your mortgage and also your total cost of the property- all-in.
You will also have a line item for coverage of lost rents in the potential case of an event rendering the property uninhabitable.
You will also want to carry liability coverage and potentially an umbrella policy to cover any shortcomings.
Hope that helps.
Regards,
Steve
MB 35, LLC

Nov 3, 2010
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Wilbur B.
Broker/Agent
Lake City, SC

The first answer you received is a good one. There may be two types of policies available to you (1) Replacement Cost, and (2) Actual Cash Value. Of the two I recommend you consider an Owner's Package policy that includes Replacement Cost, Comprehensive General Liability, and Loss of Income. Most of the other things are standard. Also, keep in mind that you need a letter from your company's underwriter telling you specifically how settlement will be handled on the Replacement Cost for losses on your improvements. Some recent policy forms state that you must rebuild the same improvements on the same land in order to be reimbused for your loss. Then, some companies will only reimburse you after you have spent the money rebuilding. It is tricky, but the interpertation the underwriter gives you is what the courts in South Carolina will inforce. Let you attorney read the endorsements on your proposed policy in advance.

Nov 3, 2010
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Michael J.
Miami, FL

Ask an MAI to put together an Insurable Value for you. that will be the most accurate way to determine the correct amount. You can always try to calculate the "replacement cost new" value by utilizing Marshall & Swift. At worse case you can just look at the value of your property and deduct the value of the land as you only insure improvements.

Nov 10, 2010
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