Multi-Family Home Insurance Policy in NJ

[Matthew Gundersen]

Good afternoon BP, I am currently looking at purchasing my first investment. It is a triplex and looks to be a sound fist investment. I am wondering what kind of insurance I will need as I will be both living in one unit and then renting the other two out. What type of policy is required/recommended? And also what kind of rate I should be expecting to pay for this type of property (Being 23, I don't know if age makes a difference quite like an auto insurance policy?) compared to what others are paying. If anyone has suggestions for companies too that would definitely make a great starting point for me.

This is my first time purchasing a house so I am unaware of all things that go into a home insurance policy. Thanks for the help. 

- Matt

[John Mocker]

Matthew,

Congrats on purchasing your First home.  As long as you are living there, the proper policy for a 3 family is a "Homeowners" policy.   You want a "HO3" Form or better.   Most homeowners policies include:

1. Dwelling (Building coverage)

     The limit should be based on the Replacement Cost of the building (cost to rebuild with

     the same kind and quality excluding the foundation)

2. Contents (Personal Property):  most homeowners policies give a set % of the Building

    limit for Contents.  Usually 50 - 70% of the building limit.   You can increase the limit

    if needed.

3. Detached Structures:  for other buildings on the property (ie. sheds & detached garages)

    Again, there is normally an included limit of 10% of the building limit.  That can be increased

    if needed.

4. Loss of Use / Loss of Rents:   Normally, there is a 20% included limit.  Loss of use is for

    your additional expenses if you can not live there due to a covered claim (ie. Fire).  The

    Loss of Rents is for the loss of Rental income if the tenants can not occupy the house

    after a covered loss.

5. Personal Liability:  For claims due to Bodily Injury or Property Damage that you become

    Liable for and which is covered under the policy.   Companies normally offer limits up to

    $500,000 but some offer $1,000,000.   Buy the max.  

6. Medical Payments:   Provides coverage for an injury suffered on the premises.  Does not

    require proof that you were at fault.  Used to keep small loses into becoming lawsuits.

    Normally offered up to $5,000 but check to see if higher limits are available.

7.  Deductible:   This is not a coverage but rather your portion of a claim.  Most better policies

     will not have a deductible for either the Liability or Medical payments coverage.  It will

    apply to the other 4 coverages.   You can select the amount of the deductible, usually

    ranges from $500 to $5,000.  The higher the deductible the lower your overall premium

    but get quotes on all the deductibles you are interested in.  Sometimes the incremental

   savings from $1,000 to $2,500 or from $2,500 to $5,000 are too small to make the higher

   deductible worthwhile.   ***depending on how far the house is from the coast, you may

   also be required to have a separate Wind or Hurricane deductible.  Most times, the

   deductible will be 2% to 5% of the building value.  That is a significant amount

   (on a $500,000 building that comes to $10,000 for 2% or $25,000 for 5%).   A policy

    with a higher premium may be a better deal if it does not have a wind deductible.

There are many endorsements that are available on the homeowners policy.  Without

knowing the details I can not suggest which would be right to add on.  Several you should

pay attention to are:

- Ordinance & Law:  Provides additional building coverage to deal with rebuilding cost

      Increases due to changes in Zoning or Building laws

- Personal Injury Liability:   Libel, defimation of character, wrongful imprisionment, etc.

     (normally recommended, especially if you are a landlord)

- Water Backup:  For water damage due to the backup of Sewers or Drains.

- Personal Articles:   Coverage for belongings that have a special or collectors value

     such as Jewelery, Furs, Fine Arts, Collectibles, etc...

Your age should not be a factor on the pricing but, depending on the company these other factors may get you credits:

- Insurance Score (company pulls certain info out of your credit report)

     It is not your credit score but generally better credit will result in a better score

- Time at your job

- Education level

- time at current residence

If you have questions on any of this info PM me.  Good Luck