Posted by Mike (IN) on September 05, 2001 at 09:19:02:
No, the cash value is not $43,000…it is just what you have invested in the home. (If your Parents sold the home for $1.00 just because they loved you has no signifacance in what the ACV (actual cash value) is.
Remember…
ACV=Replacement Cost minus Depreciation ($60k in my last example)
Market Value = the value comparable homes are selling for in that area.
Replacement Cost = what it would take to rebuild the home in the event of a total loss.
Also, your question about the contractors working on the home… Depends on what type of loss. If they cause a fire…yes fire is covered under the policy. Your company would pay for your loss and then Subrogate (go after the contractor’s insurance company) for reimbursement since the contractor was liable.
What is sufficient for insurance?? - Posted by Julie
Posted by Julie on September 05, 2001 at 06:30:29:
I am purchasing a house for cash. I would like to put insurance on the property, in case of fire, natural disaster, etc. What is the minimum insurance I should put on this property? Or, should I get a complete Home Owner’s Policy?
Posted by Mike (IN) on September 05, 2001 at 08:56:58:
The last post was assuming that this was not the home you would be living in (a non-owner occupied home) and that you would not want to rebuild it in the event of a “Total” loss.
For the home you live in or a nicer investment property you would want to insure to 100% of replacement.
Re: What is sufficient for insurance?? - Posted by Mike (IN)
Posted by Mike (IN) on September 05, 2001 at 08:42:42:
The property should be insured to 100% of ACV (actual cash value). Your agent will figure this for you.
ACV= Replacement cost minus depreciation.
Example; you buy a home for $50,000 (market value). Your agent takes info from you (like square ft, 1-story or 2, basement or slab, etc. The agent will then figure what replacement cost is. Let’s say RC is $100,000 (very typical of older homes…replacement cost can be significantly higher than market value…especially in poor neighborhoods). Your agent will use a depreciation factor based on the condition and age of the home. A home that is 50 years old in Very Good condition would receive a depreciation factor of 60%.
So you would be insuring your home for about $60,000.
Re: What is sufficient for insurance?? - Posted by Julie
Posted by Julie on September 05, 2001 at 09:01:41:
Mike:
Thanks for your reply. This is a rehab house. Purchase price is $23,500. It needs $20,000 fix up at most. So, the Cash Value would be $43,000 if I’m understanding you. It’s not necessarily what the property is worth, but how much I have into it? What about the contractors working on the home. Will the insurance cover it if anything happens to them while working on the house?
Re: What is sufficient for insurance?? - Posted by MSchmidt (IL)
Posted by MSchmidt (IL) on September 05, 2001 at 11:17:40:
A few ways to look at this. One is to cover your costs and/or the replacement cost. Just about every home with a mortgage is over insured, but the banks require the amount of the loan to be covered. An insurance company will not pay out more than the replacement cost of the actual structure in a total loss. Keep in mind even with a total loss you still have the actual property and a foundation/slab in place.
As for the contractor you should be getting a certificate of insurance from ALL of them. If you?re running this as a business and are carrying your own commercial liability, your insurance company will audit you and charge you for every missing cert of insurance. Regardless of which way your setup, always get a cert of Insurance from all contractors.