How much building coverage do you actually need?
Most landlords insure their building for what they paid or what the county assessed. Both are wrong, and both can leave you short after a fire.
The number you want is replacement cost: what it costs to rebuild today.
Purchase price includes land and market timing. Land doesn't burn, and insurance doesn't rebuild a market.
Assessed value runs low on purpose and ignores construction costs. Use it as a rough check, nothing more.
The co-insurance penalty
This is the trap nobody explains, and it bites even on small claims.
Most policies require you to insure the building for at least 90% of replacement cost. Fall short and the insurer cuts every payment by the same proportion you were underinsured.
Here's what that looks like:
Rebuild cost: $1,000,000. So you should carry at least $900,000.
You insured it for $600,000 to save premium.
A kitchen fire does $200,000 in damage. Well under your limit, so you'd expect it paid in full.
Instead: you carried two-thirds of what you should have, so you get two-thirds of the claim. About $133,000. You eat the other $67,000.
Underinsuring doesn't just hurt at a total loss. It hurts at every loss.
RCV vs. ACV
Replacement cost (RCV): pays to rebuild with new materials. This is what you want.
Actual cash value (ACV): pays replacement cost minus depreciation, so an old roof pays out a lot less.
We default to RCV. Some carriers only offer ACV on older buildings. If that's yours, you should hear it up front, not at claim time.
