Property Insurance - self insurance

[Christopher Lombardi]

Does anyone know anything about self insuring your properties and doing it in a way banks are comfortable with? I just pay way too much in insurance and if I could put that money into an account instead I would have a lot more than I need in the event of a claim. I’m sure there are others on here in the same boat. (Not looking for insurance sales pitch). Thanks.

[Frank Chin]

Originally posted by @Christopher Lombardi:

Does anyone know anything about self insuring your properties and doing it in a way banks are comfortable with? I just pay way too much in insurance and if I could put that money into an account instead I would have a lot more than I need in the event of a claim. I’m sure there are others on here in the same boat. (Not looking for insurance sales pitch). Thanks.

 Chris, good discussion. 

As to the issue of captive insurance subs, I worked in the accounting department of a small insurance carrier, set up primarily as a tax shelter. They had to have all of their policies re-insured, paying premiums, so I don't know how much you'll save if you think premiums are too much setting up a captive sub.

If you have a mortgage, without insurance, the lender would rather not deal with the loan as it's unsalable in the secondary market. I bought properties at auctions financed by banks as portfolio loans with the banker going through a checklist of things the mortgage should have. In my case, it's bought as is, but on the list is insurance. 

I agree with @ Jason Bott you should have liability insurance in any case. I had a business in an LLC and I overheard a customer talking to another in the waiting room saying he does OK suing businesses for small amounts since litigation is such a PITA, not knowing I was the owner. Sure enough some time later, he staged a trip and fall, photos taken with injuries. I told him I'll pay him a few dollars to have it checked out. Didn't hear from him for a few months, and he presented a doctors bill for $6,000. I sent it to my insurance, but was told I should've notified them within 30 days, but will handle legal issues. Some time later, customer call to see me for help as his attorney stopped taking his calls. I got a good laugh, help him? I called my insurance company, checked their claims department, and said, yes, they got 3 nasty demand letters on file, 3 calls, and told the lawyer they'll look into it. They told me the scammer's attorney works on contingency and 3 letters and 3 calls is all he'll do for a small claim. The scammer then ask me if I'll pay him a few hundred to go away, but I told them, shouldn't done that before you got the lawyer, but you now have to deal with insurance.

My wife had a younger sister killed by an oil company truck of a major oil company running a red light. Had 15 lawyers turning down the case, till the 16th took it. Turned out that oil company had a reputation of litigating to the death, never settling. This was explained to me when my with went to pick up the settlement check, a few hundred thousand, at the lawyers home. Lawyer explained he's retired, home paid off, kids finished college and only takes cases for the challenge. Has no problem with the oil company dragged things out for years as he as all the time in the world, and my wife's family were all young at the time, was in no hurry either. The oil company realized this finally and settled.

Having seen this, I'm of the opinion good liability coverage keeps scammer away and you the aggravation.