How to Handle Homeowners Insurance Setup

[Adam Jackson]

Hello!

I have some questions on how to properly set up the accounting for rentals, and what experienced investors do when handling the accounting for multiple properties.

Currently based on what i've read, it's a good idea to keep the accounting for each property separate.  We recently purchased our first two investment properties in Kansas City, and the way we have things set up is that each property has a separate bank account that handles all transactions related to each individual property.  In my mind it makes sense since it keeps everything separate and it's easy to see how well each property is doing.

One snag with this plan is that we have one homeowners insurance company handling both properties, and they won't let us have separate auto-payments for each property.  I really want to auto-pay everything that I can so that everything is easier to handle, especially as we get more properties.

My question is, how do you have your accounts set up?  Am I worrying too much about keeping everything in separate accounts?  Do other homeowners insurance companies allow for one account to have different auto-payment setups for each property in the account, or is that not really a thing in this industry?

We could just have each property have a different homeowners insurance company, but then we worry we may be missing out on potential discounts for bundling everything together.  I know other types of insurance do this, but is this a thing that most homeowners insurance companies do (give discounts to investors who have multiple investment properties with that company)?

Thanks in advance for any advice!

[Bo Bond]

Adam,

I can help with the insurance part of your question.  

While it's completely up to you, I can tell you that most investors I've dealt with seem to start out using agents they're most familiar with and tend to have separate policies for each of their rentals.  The issue with this is that as you grow, you will likely reach a threshold where that particular carrier doesn't want to insure any more of your rental properties.  If you have an independent agent, then they can shop other carriers and keep moving forward, for find you a policy that can bundle them all under one policy.  If it's a direct writer carrier, this may be much harder for them to do depending on what level of flexibility they have within their company.

In either case, at some point you're likely to want one single policy that can insure all your properties.  At what point you reach that threshold is completely up to you, but for most it seems to be around 10 rentals.  The main reason is because you're likely to have 10 different renewal dats to mess with throughout the year, 10 different coverage forms to review and worry about, likely to have different deductibles and endorsements on each policy, different carriers, etc.  Having to mess with insurance renewals 10 different times in a given year can be a paperwork / tracking nightmare.  So the more rental properties you have in your portfolio, the more likely you are to want them insured under one single policy with one common renewal date.  This means you only mess with insurance once a year for all properties (unless your adding, removing, or refinancing properties).   

Most independent agents have access to tailored products that can do this bundling for you.  Bundling alone "usually" isn't what's saving you money.  The agent shopping markets and carriers for the best coverage and rates is typically what's driving the savings.  With some agents, a single policy for each rental can save you just as much as a bundled option can, and in other cases it may not compete well at all.  It's more about the carrier's current rates and their underwriting flexibility.  My suggestion is to test both, and go with what fits you best right now.  Then as you grow your portfolio, you test those options again (shop your insurance w/ other agents & carriers) when you feel it's necessary.  Hope you find this helpful.  Good luck!