Since no lender will allow a property to go uninsured, unless this is new construction or the property has no existing debt, just take a look at what the current insurance is. Of course it varies a good deal based on many parameters including condition, location, property type, etc. I pay annually about $2.9 per $100,000 of value right now, up from $2.2 per $100,000 of value a year ago for well managed and well maintained apartments which are on average about 35 years old. Insurance companies tend to impose arbitrary large increases like that based on their own recent experience even if there is 5 year history of negligible claims. To get rates this low, I choose to use "Actual Cost Vale" rather than "Replacement Cost Value" insurance. The latter is based on the market price in the area for a general damage restoration contractor to restore the property to its condition before the loss. The owner pays the deductible and the insurance check goes to the contractor. In the former, the adjuster begins with the replacement cost value number then applies "useful life" deductions to the various components of the damaged property then also subtracts the deductible. I always have a lost-rents rider. The check then goes to me and I act as the general contractor and use subcontractors to do the various tasks required. Only about 5% of policies are ACV, but it lowers premiums and payouts about 30% and it gives me flexibility if I want to change things like the configuration of kitchen cabinets. Even though payouts are lower, I usually have enough to do the whole job because I already have good contractors who help me with apartment renovations and I don't have to pay the general contractor's charges. Evan D. Harrison, Wisconsin.
Aug 24, 2015