[Glenn]

We have several rental properties. When we get insurance, they tell us that we are eligible only for depreciated value insurance because the houses are "older".

They tell us that we can get replacement value insurance if we improve the propertites. They mention replacing the roof, improving the electric, plumbing and HVAC.

Can anyone tell me why this is? And how long do these improvements last? Do I have to put a new roof on every 3 years to keep being eligible for replacement value.

The cost of the replacement is only about $150 more than the depreciated so we'd like to get it if we can.

Thanks,

Glenn

[nikosmom]

Your company should be doing an estimate as to what it'd cost to rebuild the home which takes into account the age, type of structure (masonry vs. frame), as well as likelihood of certain perils (hurricanes, theft, etc.). In fact, oftentimes older homes are more expensive to insure because of the [high]quality of the building materials used.

As for receiving a discount, many companies require that you have the 3 "major" systems replaced simultaneously (Plumbing, Electrical, HVAC) to qualify for a discount on an older home. You don't have to replace the systems every 3 years but the discount will gradually wane over time as the systems get older and less efficient. Usually there is no incentive for roof replacement because it's considered regular maintenance.

Is it possible that you are confusing the term "replacement cost"? This usually refers to contents. Your home should be covered so that it can be replaced should it be destroyed; after all that's the point of the insurance. Usually a home appreciates over time and your coverage should adjust periodically to reflect this.

If your current company is telling you that they won't fully cover your home, it may be time to shop around. As long as the home is in insurable condition then there should be no reason that you can't have it covered at 100%.