@Wesley Pittman Jr T described what I hope to get out of it. My biggest concern is loss of a unit due to negligence by the tenant. My tenants are low income and extremely judgment proof. The protection I seek is someone to go after for cause. I am not unduly worried about acts of God or bad wiring. I maintain my properties myself -not licensed trade type work- and can control that issue somewhat. (That also adds another layer of liability to myself.) The other stuff is just a conscious decision to assume more risk to grow my portfolio with these cheap cash flowing properties.
I also happen to be a bankruptcy attorney so I do not recommend this strategy to just anyone. I have set things up in ways to limit my liabilities personally so the most I can lose is a few houses. It sounds like Jr T. has similar business advantages. Let me stress- I am not suggesting a strategy for anyone else to follow. I am simply stating what I do and why I do it. You should always do what you know and feel right about. My wife and I are fully aware there is a possibility that bad things can happen. I am prepared to lose everything I have and start over if need be.
The numbers for me work like this. For a stated value policy of about $20,000 I am looking at $500 per unit (tornado alley!). For 18 units I own and co-own that is $9000 a year. I average a little over $15,000 per unit all in. I will be able to add another unit in a year and a half. That number has been accelerating over the past 8 years.
As, Jr T said-ish, I can not justify paying someone money to fight me when it comes time for a claim. I also understand I may not collect. If I could find a policy that matched the risk I would be all over it. Most insurance policies have pretty low limits so all of the catastrophic scenarios would not be covered by a standard policy anyway without the umbrella policy. (i.e. $200,000 limit and $2 million claim- who pays that?) Also, @Jason Bott you have to be fully insured on the underlying properties for an umbrella policy to go into effect, right? I would love a stand alone policy which covered me as the the property manager independent of what properties I managed. Does that exist?
One last point- Insurance drives me crazy. I am currently paying $2700 a year for my primary residence which I bought last year as a foreclosure for $42,000. The reason? I have to insure it for replacement cost of $250,000. I don't want the same house if it was damaged. I want the current value and I will go find another good deal. I can't get it and until I pay off this mortgage I am stuck. I just don't understand insurance, I guess. The math doesn't work for me.
