Not all coverages are created equal

[Kevin O'Connor]

It's never a great time to talk about insurance after a loss because not all coverages are created equal. Quickly I want to break down the 3 different types of "Real Estate Risks" through the lends of the carrier and then dive into the one most heavily focused on in this thread as well as this site. 

1 Commercial Property- Lessor's Risk Only (LRO)

2 Residential Home Owners 

3 Habitational*

When talking about investment real estate we talk about LRO's or Habitational (Hab Market).  LRO is probably one of the easiest coverages to place unless you have a high-risk tenant, Cannabis Dispensary, Chemical manufacture, or something of that nature. Most of the time LRO will fall into the "Standard Market" meaning you are going to get a competitive price and comprehensive coverages no matter where you are, generally speaking.   

When it comes to Habitational Real Estate, ie: apartments, condos, multifamily dwellings, short-term rentals, Student housing, affordable housing... and on and on.  This is where not one "risk" looks the same. Let's take Student housing for example. Right now the national cap rate for a student housing deal is right about 6%. which means there is a TON of cash to be had within a student housing purchase. However, when it comes to placing your insurance, 99% of carriers have student housing exclusions that you may never know about!.  It's NOT a question asked on most insurance applications and most agents don't really care about the type of occupancy. So you just buy your first BIG DEAL you have a 10 unit, 35-bed student housing complex and you bind GL on the property but didn't disclose that more than 10% of the occupants are Students, effective that moment you have NO insurance. 

This is where a Habitaional market specialist comes into play because it gets even more complicated than that. Where are my CONDO complex owners?  You know what I am talking about. Do your bi-laws explicitly outline who owns what and who's insurances start where? If you have a habitational real estate portfolio I highly recommend that you dive into your current coverage forms with a Broker, or Consultant to better understand how your "risk" is interpreted by the insurance carriers. If you ever hear a story about a carrier not covering a claim it wasn't because that carrier is trying to get out of forking money over. It's because your broker was negligent in obtaining appropriate coverages.  

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