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Buyer's insurance cost check

See what repricing the insurance does to a deal's income, value and debt coverage.

Enter net operating income with the seller's premium in it. Both premiums are your figures, so ask your broker for a quote on the building you are buying.

Change in value

-$1,833,333

Moving from the seller's premium to $320,000 takes $110,000 off net operating income and $1,833,333 off value at a 6% cap rate.

MeasureSeller’s premiumNew premium
Net operating income$1,800,000$1,690,000
Value at the cap rate$30,000,000$28,166,667
Debt coverage1.38x1.30x

Before you close

Our due diligence inspection covers storm risk, roof life and insurance cost, with the seller's policy and losses, so the numbers rest on the building itself.

Get ProtectedDue diligence inspection

Estimate from the numbers you enter. General information, not insurance, legal or financial advice, and not an appraisal or a lender's underwriting.

Why the seller's premium isn't yours

A seller's insurance premium can be years old or written on terms a new owner won't get, and a change in premium moves net operating income dollar for dollar. This calculator carries a likely new premium through income, value and debt coverage, so a deal's numbers reflect the insurance a buyer will actually pay for.

How the math works

  1. Change in income: the seller's premium minus the likely new premium.
  2. New income: net operating income plus that change.
  3. Value: income divided by the cap rate, before and after.
  4. Debt coverage: income divided by annual debt service, before and after.

What the math leaves out

  • The quote itself: the tool supplies no premium. Only a quote on this building shows what you would pay.
  • Terms: two premiums can carry different deductibles, limits and exclusions.
  • Your lender: a lender sets its own coverage test and may underwrite income differently.

Questions

Where does the new premium come from?
From you. We have no premium data, so the tool doesn't suggest one. Ask a broker for a quote on the building.
Is this an appraisal?
No. It applies a cap rate you enter to income you enter, so it shows how the numbers move, not what the building is worth.
Why isn't there a debt coverage target?
Lenders set their own tests, so the tool shows the ratio before and after and leaves the target to your loan terms.

Terms used here

Sources

The tool does arithmetic only and sends nothing anywhere.

    All free tools