SPC038 – Fundamentals – Insurance w Ed Babtkis – Deductibles, actual cash value vs replacement cost, and much more


1)   Why are some policies more expensive than others?

Coverage, deductible, location

2)   What is the difference between actual cash value and replacement cost coverage

Actual cash value will depreciate the claim depending on how old the house is, replacement cost will pay up to policy limits if you rebuild

3)   Why should I care about liability coverage

Many investors will be wiped out if sued if there is a major occurrence on their property

4)   How is coverage amount determined

Many providers have their coverage methodology determined by software that takes into account labor rate and material cost per zipcode and its usually too high. Since premiums are computed based on coverage amount this can be a critical pricing component

5)   Brief discussion on flood insurance

Lender required if in flood zone, if cash purchase owner should at least know if property is in a flood zone or not

6) Shared blanket programs vs Individual policy for each property

Most of the programs offered outside of a couple are shared blanket programs meaning you are an Additional insured vs the “Named Insured”. This means less rights when a claim occurs, kind of like giving someone a power of attorney to negotiate and received an insurance settlement on your behalf

7) USA2 is a good carrier and the reason their premiums are high is usually because their methodology requires an excessive amount of coverage, the higher the coverage amount the higher the premium. USA2 also declines coverage and surcharges coverage if they are not crazy about the property or area the property is located. Still, if the umbrella is worth it to you, you might want to consider moving your rental property to them as that would solve your problem.

$1 million of liability per occurrence and 2 million per aggregate which is fairly standard, and this is your only rental, than ask USA2 if they can write you an umbrella and exclude your rental property ($1 mil occ $2 mil agg is plenty for 1 rental property).