Landlord w/ 6 Properties & Multiple Insurance Claims WHAT TO DO?

[Alex Babayev]

Hello BP World, 

I currently have 6 rental properties that are all in my personal name. Over the years I have had 3 different claims at separate properties some that I no longer own. My problem is insurance companies are now not insuring me personally for my primary residence or if they are insuring offering really high rates because I am considered high risk individual in their eyes. 

How have you guys avoided this issue? Are you experiencing similar issues?

Regards, 

Alex B.

[Jason Bott]

@Alex Babayev  At your size, I would have recommend filing all of those claims.  That way you push off the out of pocket cost in the form of higher insurance premiums over the following years, instead of an immediate big hit.

Once you move to an LLC, insurance companies look at a 5 year "Loss Ratio". The Loss Ratio is the amount in premium collected divided by the amount of claims in 5 years. Let's assume you pay $5,000 per year for all 6 properties, with your claim amounts listed above, that puts you at 128% loss ratio.

Insurance companies look at clients the same way you look at a rental property and see if the #'s work. With your claims, your #'s don't work for the insurance companies until they can get a premium that would make that loss ratio look closer to 70%-80%, or an annual premium of $9,000-$10,000.

If you had 5 x's as many properties, 30 units, you would be paying $25k.  Hopefully you would not have 5x's as many claims.  If this held true, the claims you had would have much less of an impact on your premiums.

I have clients with 1,000 units that average only 1-2 claims per year as they just have staff handle anything under $10,000.