Insurance Liablity Amounts for Rental

My first post…

I have a rental house we just purchased and have gotten some really different quotes ($640/yr to $1,200/year) for an 1800sqft home built in 72. How much liability to you care ($100-$300k?) and should I just cover structural at the appraised amount of the home (replacement value?).


I carry $500,000 liability and the premiums average $40-50 per month for SFHs. That includes full landlord coverage, but a $2,500 deductible. I cover the house structure for it’s market value.



I carry an umbrella liability policy, for $3 million, and because of the requirements of the umbrella, I’m required to carry $500K per property liability, and $500K each for my autos. The umbrella has a $500K deductable for each property and auto.

As to hazard coverage, appraised value, and re-construction value could be two totally different things. Here in NYC, the appraised value can be $700K for a property, and only 350K to rebuild it, in view of high land values. The insurance people has a formula for figuring the minimum coverage to rebuild.

In addition, rental properties are required to carry “rent interruption” insurance in most cases, as required by the bank. The formula here is 10 times the annual rent, and overrides the reconstruction cost if it is below this amount. For instance, if the annual rent is 35K, I’m require to buy at least $350K in coverage (10x35K) even if complete recontruction cost is $275K, and the appraised value can be $700K. On the other hand, if I only obtain $275K coverage, the recontruction amount, I’m only covered for $27.5K in rental income, thus violating the mortgage covenant of covering my entire rental income.

Premuims vary by state, rated by risk, if near coastal area, fire prone area and so forth, so what I have to pay has no bearing on what you have to pay.

Level of coverage is another factor. A neigbor of mine, had a fire, got top of the line coverage had himself and his two tenants covered for “hotel stays” during the reconstruction.