Finding Insurance - STR/MTR that is rented room-to-room (3/2 w/attached ADU)

[Zachary N.]

Hi everyone, my name is Zack and this is my first post here. Big fan of the BP podcast and I am an early stage RE investor. The strategy for my wife and I is to buy and hold (rent), and our first home has been a house-hack (3/2 with an attached ADU; 4/3 total). We are in escrow for a second property and I am trying to sort out the transition of the first home from a primary residence to a rental property. We've had a Farmers insurance policy since buying the home, but Airbnb really spooks major providers, where they require a standard 6 or 12 month lease agreement to proceed.. My insurance agent mentioned Crystal Lake (?) as a "vacation/seasonal home" insurance provider that might be a better fit. I've also inquired with Proper Insurance, which seems more comprehensive, but they will only provide insurance if we rent our home as a 3/2 and an ADU with no shared interior space (our room-to-room approach would not be covered).

I would love some suggestions on how best to proceed and where I might be able to learn more about what is insurance options are available for room-to-room STR and MTR in Southern California. Thank you so much for your support!

All the best,

Zack (San Diego)

[Michael Norris]

Assuming the properties are in California based on your post (San Diego) finding insurance may be a challenge as multiple carriers have stopped accepting any new business there. Your Farmers agent should have access to a company called Aegis who should accept the multifamily property used as a short term rental. (Your state may be different)

She can access to Aegis thru Kraft Lake (tell her that) but may not be aware of the option or has not used them yet and is offering you a policy from a carrier she does have experience with.

Previously Foremost would have been a great option but as of October 2022 they stopped accepting new business on multifamily properties. 

For anyone reading this... The insurance marketplace is a MESS right now so if you have coverage - make sure you pay on time and if you think about filing a claim make sure it's worth it as most of the carriers I'm working with have new rules in place not to accept ANY new policies from a client with any paid losses in the last 3 years. 

Yes that's right - you could have 20 properties insured with a carrier for multiple years with no losses and then have 1 paid claim (even a small one) then find out when you go to buy an additional property they won't accept it.

Check on your insurance friends they are not ok at the moment lol.