So we have several rentals in addition to our primary residence, I'm doing a deep dive with my insurance lady and discovering what I'm actually insured for is much less than the market value of my houses. So I have two questions :

- is this OK? Her explanation was they take a range of say $125-$150 per square foot for the rebuild cost of that house and they obviously have me on the low-end. An example would be a house that I could probably sell for 275K but I'm only covered for 226K.

- The other question is, for each of these houses I have an additional 10% under "other structures". She told me this is for things that are detached from the house, however in a catastrophic event that would require rebuilding the house from scratch, she told me they would include this amount even if there's no detachment. So for the example above my $226,000 of coverage would now be 226,000 plus 22,600. Is that how this works? Even if that's the case how much should I increase my coverage to in this example for a house that I could sell for $275,000?

Any advice is appreciated, thanks

I'm a commercial insurance broker that specializes in real estate, more specifically multi-family, but the principle is the same. Insure for what it costs to rebuild, not what market value is. It goes both ways. A lot of my clients have to insure their properties for way more than what they bought it for, but in the event of a loss, you'll want to have sufficient coverage to rebuild, especially if there is a coinsurance clause.

In regards to your second question, I wouldn't worry about that too much. That additional 10% is not going to affect your premium very much and doesn't hurt to have it, even if you don't need it. If you want me to take a look, shoot me an email at username at gmail. I do have some clients who have some single family rentals in addition to their apartment complexes. I can take a look at your policies and see if you're sufficiently covered or over insured or have any questionable exclusions.

Most people have to fight to keep their coverage down. Im with farmers and USAA and both try to over insure. I think a lot of it depends on the individual property though. For many of mine, lot values tend to make up 30-50% of the total home values. It would not make sense for me to rebuild so I dont need to keep full rebuild coverage. If I can pay off the mortgage, sell the lot, and break even on pre-catastrophe value then I'd be good. In an area where lots tend to move slow, I might think different of it.

Your houses all are on land that is valued at xxx and improvement, structure, at yyy or replacement. Do not insure the land it's not going anywhere. Your example seems to reflect that. Your land value can roughly be seen on the county appraisal district website.

Thanks everybody

SteveBott said:

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Your houses all are on land that is valued at xxx and improvement, structure, at yyy or replacement. Do not insure the land it's not going anywhere. Your example seems to reflect that. Your land value can roughly be seen on the county appraisal district website.

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That and homes rarely are total losses within the city. Foundations, driveways are all reused, so it's not a 100% direct replacement there either.

I would also add that while you still have the land and foundation even in worse case scenerarios don't forget about clean up cost. Probably less than the property value but just something to think about in regards to being underinsured.

OP thinks he's over insured. He is probably not. But a little bit over insured is ok too.

USAA likes to over-insure so the deductible is higher, and they won't have any claims for small stuff.

Example. They insure a $250,000 home for $350,000, which means no claims for anything under $10,000 (2% + $3000 probably a wash when you consider the higher premiums afterward).

HouseDivided is spot on. You always want to insure the structure for replacement, not the value of the land/location. I would probably agree with your agent on the value/ft also, depending on where you are located. The 10% coverage for other structures, I wouldn't worry about either. It is a "free" coverage that is included in the policy whether you need it or not. If you are wanting to increase the value beyond the actual limit, ask her if they offer a 25% replacement cost endorsement. This is usually a cheap endorsement that will add an extra 25% to the dwelling value if needed to rebuild, remove debris, etc if something were to happen to the house.

Hope that helps a little! Feel free to PM me or email me (morgan.moudy@rolloinsurance.com) if you have additional questions.