All Forum Posts by: Aaron Porter

@Ernesto Barragan JR you just asked the question that every insurance agent and financial manager are going to fight over...  

The insurance guys have all these products that are really awesome and can do some amazing things... I even like MEC's, but you have to have an agent that is knowledgeable in wealth management and growth.  One that is willing to work with you and the insurance carrier to make sure that the policies are properly funded and that you don't have on of the horror stories that investment managers like to talk about.  

The argument from both sides goes like this... 

The financial managers say that insurance agents get paid on huge commissions and that the policies/contracts that we offer don't perform well and that any decent investment manager can out perform what an insurance policy will do.  

Insurance agents say that if you look at the lifetime return of an insurance product when properly set up and funded it will be on par with almost any mutual fund at year 15. By year 20 the insurance cost basis is much cheaper.  Insurance products are front loaded for fees so as a short term play insurance is definitely terrible.  Insurance is a long term play, and it is one that when done right you still have access to your money so that you can use it to invest in other places.

@Michael Elder your existing homeowners policy has liability insurance built into the policy... at least it should. If you choose to insure your home with a standard homeowners policy and you rent it as a STR on Airbnb or vrbo or one of the other vacation rental platforms your insurance carrier will deny you coverage if you ever file a claim. and if they approve the claim then do an investigation and find out that it was a STR they will make you repay the monies that they the insurance carrier paid out in the claims process.

you should definitely get a policy that covers short term rentals.  Most of the carriers that my agency works with offers a short term policy rider.  proper insurance has done a good job at marketing themselves as a comprehensive solution to the short term rental industry.  not to say that they aren't a good company because they are but in my opinion I have not seen anything that makes Proper any better than any other carrier in the same market.

I agree with a lot of the comments on here... take you time, don't let anyone talk you into anything that doesn't align with your long term goals.  If something is a good deal today it will be there tomorrow and if it isn't something else equally as good will come up soon.  

As far as what to do with the insurance payout, find a professional that you trust and has your best interest in mind.  Be open and honest with them about your short term and long term goals, have them help you run through multiple scenarios and then if none of those scenarios still don't feel right get a second, third or fourth opinion.  

My in-laws used to have a lake house that  they placed on VRBO and rented out when they weren't using it.  

-Their biggest issues were:

-They didn't carry the proper insurance and had a guest fall a break an arm on the stairs and so when they got sued they paid the lawyer and the settlement out of pocket.

-Keeping the bugs at bay. 

-There was no municipal sewage system so the septic tank had to be regularly pumped, sometimes even when a guest was staying in the home.

-About every 4th or so guest broke the boat dock because they didn't watch the short training video on how to operate the dock and the boat.

Both travelers and Allstate are good carriers, and are easy enough to work with when it comes time to file a claim... the products (policies) that they offer are going to be almost identical with the exception of how much coverage you are placing in each category of the policy, and you "the client" is the one that dictates what those amounts are.  That is really the only things that change around and effect the cost of the insurance.

Property/auto insurance rates are very cyclical. meaning that this year Allstate may be the most cost effective for your property in your zip code, but next year it is going to be liberty mutual, in 3 years it is going to be nationwide and in 5-7 years all state is going to be the cheapest again.  Property/auto insurance is also very fickle, you can get a quote for coverage 1 day and 2 days later the price will change. 

There is such a disparity when looking at the cost of insurance... your house may be cheapest with one company while your neighbor next door will be cheapest with a different company.

Property insurance is also cyclical meaning that one company say Allstate is going to be the cheapest insurer today.... In a year it may be liberty mutual, in another year it may be farmers, and then in 5 years it may be Allstate again. 

Most of the time it is worth not having the cheapest insurance for a couple of reasons... one the cheapest is direct to carrier but those options a lot of the time are not properly set up and can have major issues when you need to file a claim, sometimes resulting in your claim being denied.  another reason is that the cheaper the insurance the more is being left out of the policy meaning you are taking on a higher risk profile personally instead of transferring that risk to the carrier.  and the last reason that I am going to write is that a lot of the time the cheaper insurance is from a lower rated company usually meaning that they are leaving you open to risk while also being a company that is notorious for making you the insured jump through a million hoops to get a claim processed and paid.  

It is most beneficial to develop a good relationship with an Independent Insurance Agent who can quote you for multiple companies and who offers annual reviews of your file.  

Veronica,

getting quotes from different insurance agents is a good way to understand the cost of insurance.  Building a good relationship with your insurance agent can be extremely beneficial to your long term goals not just on the cost of property insurance but also when looking at your financial freedom goals, and working toward building a legacy for yourself and your heirs.

property taxes are almost always found on either county assessor websites or you can call the local city/county offices and they can look it up for you.  

Lynda!  Welcome to the real estate investor club. 

Building good relationships with knowledgeable professionals like Real Estate Agents, Real Estate Lawyers, Property Management companies, Local handymen and contractors, and of course an Independent Insurance Agent. All can be a major benefit to you and your end goals, as long as you keep those goals in sight both when looking in the short term and long term.   

One of the reasons that knowing the difference between low risk and high risk properties is for cost of insurance... I have a client whose cheapest house to insure is actually his most expensive property, his most expensive property to insure is about $1500 a year and the home is only worth about $120K and his cheapest house to insure at $520 a year is worth over $500K... 

Meaning that where the houses are located, the neighborhoods, and proximity to different variables like emergency response time, local theft/vandalism/arson, violent crimes, and others all play into the cost of your properties insurance... and they also play in what you can expect to rent a property for.

 there is some weird legality issues that come up here becuase technically renting a property on airbnb is an active business.  
More and more cities like Austin, Santa Barbara, New Orleans, Nashville, and Chicago are now requiring short-term rental owners to carry a business license and carry $1,000,000 in commercial liability. Communities are also putting in requirements for occupancy tax collection, like a hotel. None of these requirements exist for a long-term lease rental.

what this also means is that technically a standard landlord agreement for you is not the proper coverage as your tenant is operating a business from the property.  You should technically carry a commercial policy and require your tenant to carry the other needed coverage to conform to your local requirements.

so for the OP this is also going to be a similar situation. As an insurance provider I strive to do 2 things, 1 make sure that my clients are properly covered in what the client deems as their "risk tolerance" and 2 make sure that the client is covered so that if they have a claim it doesn't get denied and then the client sues me...  Call me a self preservationist... I don't want to have that stain on my record so I am going to make sure that you "Mr./Mrs. Client" are covered.
and yes Sheryl is right Aircover is not insurance.

Valerie

rentals where the tenant is in the property for less than 6 months is considered a short term rental by all of the insurance carriers we work with.  Most carriers just need the differentiation so that they can give you the right policy.  If you have the wrong type of policy and have a claim you run the risk of having the claim be denied.  In the duplex does each side have a separate address, utilities, etc?  If so each side needs its own policy or both sides of the duplex needs to be listed on the policy and you would specify which side is the short term rental and which is the long term rental.