All Forum Posts by: Aaron Porter

@Thomas Rutkowski

@Yangbin Tong

One of the big reasons that a lot of my clients get and use their umbrella policies is to bring their auto insurance up.  There are a lot of uninsured and underinsured drivers on the road and if you have an umbrella policy that will bring the coverage on you, your family, and your vehicle way up.  

This is a breakdown of the average cost of auto accidents in the US in 2020.  (provided by National Safety Councel https://injuryfacts.nsc.org/al...)

As for how much liability coverage to have on your rental properties.  That is up to you.  I have clients that carry the minimum and tell me they justify it because they are good people and don't do shady s***.  Conversely I have a few clients that have a $20 million umbrellas.  
As an agent my recommendations usually go something like.  Having a $1 million dollar umbrella is relatively cheap way to make sure that you are covered for the top limit of what 90%+ of the population could ever need.  However if you do not want to get an umbrella yet that is totally ok but I do recommend having 500k liabilities limits on your properties, including your personal home.  When the time comes in your Real Estate Investing journey an umbrella policy will help you to mitigate risks in the way that are the best practices.  

I work with a lot of the "bigger name" carriers and a lot of the time on the hard stuff they are not competitive at all and in a way you may even be lucky to get them to write a quote.  Out of the 63 carriers that I am appointed with I only have 1 carrier that will write a quote in southern Texas right now.  Property insurance is weird.

@Jill F.  I guess more clarification would be good here.  I was meaning from a landlords perspective.  I apologize for that.  

Loss of Use under a renters policy will pay the tenants additional expenses should they be forced to leave their rented property for a temporary reason. (the tenant is still expected to pay their regular living expenses including rent while they are out of the home, this doesn't always happen)

Loss of Use under the Landlords policy will pay the landlord for lost rent should a tenant have to move out or stop paying for a period of time. 

Loss of Use under a Homeowners policy will pay for additional living expenses should the homeowner have to vacate the property or move items into storage after an accident.  I had a water line break in my home once upon a time.  We had to move out for almost 6 months while the property was being fixed and the rental we moved into didn't allow pets so we had to board our dog.  Our insurance not only paid for the rental house, it also paid to board the dog.  (the town we lived in was very small and had extremely limited rental properties)

@Evelyn Liaw  Whole Life insurance is not a scam.  Just like a good investment if you set it up properly and take care of it over time the reward can be significant. 

@Thomas Rutkowski was right about a few things.  in the beginning the cash value to premium paid into the policy should be close to 90% (policies differ depending on the carrier and how the policy is structured)  In most cases to non MEC a policy you cannot fund it faster than 7 years.  So if that is the strategy you are going for then paying in the $100k over 7 years would be a better strategy. 

However if you are ok with your policy falling under MEC rules then you can do a single premium payment of the full $100,000.  

MEC policies are very useful and valuable for certain strategies.  Just like a non MEC policy is very useful.  You would just need to understand the differences.

Also the money that you place into the policy can be available to you the same day that you "fund" the policy.  

The cash value will grow over time to being worth more than the premium paid in.  In most cases this happens around year 8 for a standard funded policy.  This is different for a MEC.

I think everyone so far has "hit the nail right on the head"  

Insurance is not a maintenance plan, some people are able to get away with using insurance partially for that use.  I.E. you have a water line break in the property and the flooring/drywall and trim were all 30+ years old.  Insurance is going to replace that with new material provided you are insuring your property for replacement cost and NOT actual cash value.  Or you have a 15-20 year old roof that a serious wind storm tears off a substantial amount of your shingles.  insurance isn't going to patch the roof they are going to replace it.  If you are insuring for replacement and not actual cash value.

Use your insurance for what it is intended Accidents, Catastrophes, and Acts of God.  All the rest is on you to "live within your means" save and be smart so that when things need to be replace you have the ability to do so.  

I have some personal experience with home warranties.  It was my personal home and it was great because I stayed on top of the builder and made sure to have them come and check everything with a 3rd party General Contractor.  I had doors adjusted, drywall fixed and replaced, the roof maintained, water leaks fixed and some tile flooring replaced. 

Would I pay extra for a home warranty?  NO that wouldn't be worth it.  But new home warranties worked ok for me. 

@Frank Jennings  As to the severity of the issue I cannot answer.  However I can answer the insurance side.  From your coverage standpoint if you have the proper insurance coverage (landlord/Dwelling policy)  the cost of relocating a tenant due to an issue inside the property is covered. as well as the fix.  Mold is not covered so it is imperative to remediate the issue quickly and also make sure that when you find out about the issue you immediately start the steps to remedy the problem.  

Your insurance coverage can also cover loss of rent if you have your coverage set up properly. 

None of this would fall under a renters or tenants insurance policy as @Jill F. said.  renters policies are to cover the tenants personal belongings, and some liability coverage.  If the water damage is the tenants fault then it may cover the damage under their liability coverage

But how fast or slow to fix a water leak issue is entirely dependent on the size of the leak and the extent of the water damage. 

@Lance Mundo  Right now in Florida there are a large number of carriers that have a "moratorium" on new policies.  This year there have been 17 carriers leave the state, and there is no gauge yet as to what is going to happen since IAN hit.  Carriers are definitely non renewing, and there are some that I have heard and seen that have been canceled mid-term.

Having a good agent in Florida is extremely important now more than ever for those of us that are investing and or living in Florida.  If you need a referral send me a message and I can get that for you. 

There are pros and cons to both term life policies and whole life policies.  I find it extremely amusing when people (especially financial advisors) say that Permanent Life policies are not worthwhile.  
I would never say that a SDIRA or investing in stocks, bonds or the like are not worthwhile.  They all have their place and they all have their time in the market. There are things in the Insurance world that for the most part 99.9% of the time provide no value any longer. This is similar to the investment world, there are products that still exist that just do not perform in a way that creates value. 

Term Policies, if you had a good agent when you set it up, can be converted into permanent policies.  Term policies are great in the sense of what you pay for, but the statistical average of payout on a term policy is less than 10%  meaning that less than 10% of Term Life policies pay a death or living benefit.  That is because the policies either expire or the owner of the policy stops funding it.  

Conversely over 85% of Permanent Life policies pay out.  and they pay substantially more out than the premium that was placed inside of them.  So yes Insurance policies are not investment strategies in themselves.  They can be in a way, but by themselves they are not.  

However they create the ability for the policy holder to leverage the wealth that they have created into creating more wealth and then passing that wealth onto their heirs.  

I also want to point out some fallacies from @Steve Vaughan, I am not intending to cause a fight, and I hope I am not being offensive here.  However whole life insurance shouldn't be looked at as a "need".  Yes you can have term insurance that pays out a substantial cash payout for very cheap $$ while you are younger.  But the smart investor makes ALL of his money work for him. A term policy is for all intents and purposes a rental contract. You are in a sense throwing away your money, or at the best you were able to get a return of premium term policy so some of the money that you used to pay for your term policy will be returned to you at the end of the contract term. Whole life insurance should be looked at as a way to leverage the money that you put inside of the policy throughout your life time and the lifetime of your beneficiaries. because you get to pass on the wealth that you were able to create and Whole Life insurance policies work with compound interest the same way that your IRA account does. Also side note, SELF-INSURED is not what you think it is. 

and something for @Theresa Harris  The major things to think about with work supplied life insurance are Are you going to stay at your job until you die? Is the coverage that they are supplying you with sufficient to cover your desires for your estate? If you are ever planning on getting married or having children, or you want to leave something behind for some other important people in your life, the monthly or annual cost of life insurance is substantially less when you are younger, and compound interest is real just like using compound interest in your IRA and other retirement accounts

Yes insurance agents make a commission on product they sell you.  Those commissions on life insurance are 1 time.  Find an agent that wants to educate and not sell you a product.  That will be a much more valuable relationship.  

• https://www.biggerpockets.com/blog/contributors/scottsmith-2
• There is all kinds of information that you can read and use.
• If you have insurance questions those I can answer. Haha. In this area of asset protection and estate planning this stuff I have just enough knowledge to start the conversation and point in a direction and the I stop before I put my foot in my mouth.