Insurance policy ok apartments - new LLC

[Brennan Vaughn]

Running into insurance quote Issues and need help.

I JV'd an 8 unit deal with someone who has other apartments, mixed used buildings and a business under another LLC.

This is my first deal. We created a separate LLC for this property together

Insurance quotes are coming in 3x-6x higher than what the current seller is paying for insurance due to new llc, property age, apartments only, etc... we’ve heard every excuse in the book! Seller is paying $1750 per year premium and our quotes are coming back at $5000+

I need some help as this would cut into operating margins. We're trying to figure out if we should try a roller over transfer of the policy to our LLC with the current carrier?

Any suggestions would help.

[Jason Bott]

Brennan, 

A roll over to the current policy is not going to be possible as every insurance carrier requires a policy to be rewritten if ownership changes.  You will need to find a new policy for the purchase.

Insurance pricing is up in 2021 compared to 2020 for many reasons.  To add to your discrepancy, chances are the seller is insuring lower limits compared to what you are quoting/needing for financing.

Additionally, you could be getting quoted the same "rate" (cost of insurance per each $100 of building coverage), but if the seller is insuring for $175k, and you are @ $500k, that will create the pricing differential you are quoting above.

Lastly, are the coverages you are being quoted necessary for the closing?  Good to double check with the lender to make sure you are not buying unnecessary coverage.