Insurance - Don't have any & not worried. Convince me I'm crazy.

[JR T.]

I have 15 rental units and a primary residence in Frederick & Washington Counties, Maryland. Because they were acquired outright and my cash position has been continually strong since the time of the acquisitions I have not seen a pressing need for insurance. Because of my cash position I view insurance (for now) purely as a financial product to protect my investment principal.

The quotes that I've been getting come in around 2% of the total cash paid out for these properties. In the market where I'm most active I could acquire an additional 3-5 units every time five years elapsed without a claim, or fund claims from a premium savings account. This obviously wouldn't help me with a huge catastrophic loss but I haven't found anyone to sell me a product that only addresses that sort of thing.

The properties are in living trusts for estate planning and privacy purposes. Some insurance companies have had a problem with the trusts owning the properties. In a living trust I have all the rights of the deeded owner during my lifetime.

Please if you have ideas on how to make the insurance cost something reasonable in relation to the properties by seeking different types of coverages, know of catastrophic loss or other insurance products that might be a good fit for me, can provide a referral to an insurance broker local to me --- OR MOST OF ALL: can simply tell me why I'm dead wrong and WHY I should give up an additional 15 or so units over the next 20 years to have flagship insurance PLEASE reply to this thread and let's have a discussion. 

In 20 years I will likely retire from my primary profession (not RE) and at that time when the rentals are my primary income I'll want a policy that insures my income. That makes sense to me, but the current options don't and I'm not a huge fan of handing out huge sums of money to insurance companies simply for the "peace of mind." If I pay out a big premium, I'm expecting to one day have a claim that brings me within 60-75% of the lifetime premiums I've paid out.

[Joe Bertolino]

I have been an insurance agent for 15 years. I don't even bother talking to prospects like you that need to be convinced to buy insurance. I wish them luck and let them bother some other agent. Insurance is a risk transfer tool that you can choose to use or not. You say you are not adverse to litigation and that you simply give the lawsuit to your attorney... but then who pays the bill? I see slip and falls with no basis that cost $75k to successfully defend. A one day deposition runs $8k. I have seen $2m judgements for tenants getting burned trying to do their own plumbing work. $200k dog bites... You name it, I see it everyday. People think they have the stomach for litigation until a jury is staring at pictures of a child's coffin. I have seen that exact scenario for a self managing landlord without working smoke detectors or files showing he checked them after a fire with fatalities.

If you want to take that risk then go for it. The brightest minds in the RE world with 1000's of units in single entity LLC's and series LLC layering, staff attorneys and financial backing in the billions opt to buy insurance... but maybe you know more than they do. Good luck with your plan, it may work out for you, you could go 20 years without a significant claim or you may find yourself in front of a judge that doesn't think you are as cleaver as you do. Whatever you are comfortable with.