All Forum Posts by: BreAnn Stephenson

This seems very odd to me too. I would love to know more... Any agents out there who specialize in commercial coverages want to weigh in?

I second Kenneth's recommendations here. I might suggest an even higher liability limit if they are able to get it though as $100K may not cover a total loss in some cases. (Think of the cost to replace the property if it were to burn down.) Also, if someone gets seriously injured on the property, having a higher liability limit would be beneficial (Think about someone being permanently disabled, for example.) Usually the increase in cost for higher limits is negligible.

I agree with John here about the uncovered loss part.

Even more importantly, what I want investors to know is that they need to think about the safety of the occupants in the building. If there is any unsafe condition, electrical or otherwise, it could cause a serious injury or even death. Don't compromise your own or others' safety to get a deal done or try to create a bigger profit. It's easy to get short-sighted, but that can be even more costly than losing out on a deal, both financially and emotionally.

Not sure if BP will let me link it here, but the International Association of Certified Home Inspectors (InterNACHI) has a great rundown about Knob & Tube. 

I know it doesn't solve the problem of "hey, I'd like to get this insured, but most of the industry doesn't do it", but I think sometimes it's helpful to understand the reasons why they don't... and maybe that can help some accept the need for the cost to upgrade too...

I would agree with Jose here. If you are working with a reputable insurance company and restoration contractors that put forth a fair bid, allow the insurance co's adjuster to have a fair shot at it first. There are varying opinions about public adjusters, but just bear in mind that their fee will be subtracted from the settlement they help you achieve. Overall, also bear in mind that the fundamental purpose of property insurance is to bring the dwelling back to the state it was in prior to the loss, or to "make you whole." I won't go into Replacement Cost vs. Actual Cash Value settlements, and how that differs in helping re-build a kitchen from 1970, but the insurance company's contractual obligation is to pay according to the terms of the policy... meaning, any reputable insurer will follow the terms of the contract and not be looking to find a way out of settling the loss fairly. Lastly, any good agent should be happy to answer coverage questions both before, during and after a claim so that you are an informed consumer and can have the peace of mind that insurance products are intended to provide. Wishing you the best as you go through this process and I'm glad that your tenant made it out safely too!

Hi Tom, I agree with Casey here. Also, any agent that would advise you to do something potentially fraudulent is not an agent I would recommend you work with. Not only could you end up with a claim not being covered, you could also end up in trouble with the law... 

If you can't be sure you'll have it rented within 30 days then getting a vacant property policy is the way to go. Many companies do require a minimum earned premium as Casey mentioned, but there are investor-friendly companies that can insure the property as it goes through the various stages of occupancy. Good on you for thinking twice here!

The simple advice I would give as an agent, is yes, you should always have liability coverage. Some investors who choose to "self insure" the property coverage on a project still purchase liability coverage. Your instinct is right on the money...literally. What if someone is injured on the property and then holds you responsible? Not only do you have their doctor bills to potentially worry about, but also the cost of legal fees if they decide to sue you. If you are found to be negligent, your liability coverage would step in to cover both types of expenses. For example, we've seen instances where a tree fell on a pedestrian.... or a fire that occurs at one investor's house catches the neighbor house(s) on fire. My advice would be to NEVER go without liability coverage.

Also, typically speaking, the cost to add premises liability coverage is usually pretty low. For that reason, taking higher limits such as $1 Million per Occurrence/ $2 Million Aggregate is kind of a no-brainer. If someone is permanently injured or will have a long recovery time with physical therapy sessions, etc. involved, it's easier than you think to approach that limit. Although incidents may be rare, if something does happen, it can be the kind of event that could potentially take you out of business. You are wise to get this in place before you have any guests on the property!

Glad to hear that Jason!

PS... I guess that was more than just "a few quick thoughts" LOL!

Hi Jason,

A couple of quick thoughts here regarding your questions...

1. Annual premium increases of 10% are fairly typical for the industry, but overall claims performance of their specific book of business really affects this number. As an example, if State Farm had greater losses than say, Allstate the prior year, you may see a rate increase for State Farm, but not Allstate. Rates for the standard market are regulated by the state too, so that is important to understand. An standard market insurer can't just arbitrarily raise rates to whatever they want. Their rates have to be approved and they have to show reason behind the request to raise the rate. They also may be required by the state to increase their claims reserve, which again... would raise rates. You can always shop around, but just make sure you are comparing the same coverages, deductibles, etc...

2. As for coverage amounts, many companies will require you to insure to their calculated replacement cost value of the dwelling. Many use Marshall & Swift data to determine building costs. (Think cost to rebuild/new construction costs.) For some investors, this works as if the house burnt down, they would want to rebuild. For some, they may just want to clear the lot and buy the property two streets over. The real question is, what cost can YOU rebuild for and is the coverage amount they are setting close or is it grossly off... For this reason, many investors choose to work with companies that are more investor-focused which often use surplus lines carriers....think Lloyd's of London, Allianz, etc. vs State Farm, Allstate, etc. With investor-focused programs you typically have more control over setting the coverage and limits to fit your specific business model.

3. Liability is the one area of insurance that I would never recommend someone skimp on. Typically the cost is low, so there's no reason to choose lower limits. Now, this is a worst-case scenario, but what if you have a fire and a tenant dies? Or a family dies? At that point, you may want a million or more in liability coverage for your per occurrence limit and 2 million for your annual. Or, think about if someone gets injured on the property and ends up with a life-long disability. Even if you "self-insure" the dwelling, I would never recommend going without liability. Those types of incidents are the ones that could threaten your entire business. Somewhat rare perhaps, but if they do happen, for the minimal premium cost difference... "no-brainer" in my mind.

4. As for the medical limit, that is typically utilized to reimburse someone for a trip to the Dr. or the ER that can be paid out as a "Good Faith" payment without having to go through an extensive claims process. Your main limit is what takes care of any larger injury... 

5. Aside from injuries, liability also protects you if you damage someone else's property... think about one of your trees falling on a neighboring house or a fire at your house spreading to the one next door. Liability coverage can also help pay for the cost of defending you in a suit, if you are found to be at fault. That's just skimming the surface of a definition for liability, but should help you get a general idea...

Lastly, I'm sorry to hear about your opinion of insurance agents. Honestly, there are great and not-so-great representatives within every industry. I hope that you find someone that you can trust in the future. I can say that I have had my personal auto insurance through State Farm for decades and my agent and CSR's have been great. BP is a great place to find good recommendations, so I would encourage you to keep searching until you find an agent who understands your needs as an investor.

Though I am an agent, I now work in loss prevention helping investors avoid losses at their properties... so, no personal agenda in my encouragement. What I frequently find is that insurance can be a complex product and the frustration that consumers often feel is a result of a lack of familiarity or knowledge of the insurance product. Let's face it, who wants to sit down and read an entire insurance policy? Contracts are a central component of investing and insurance is just one of those contracts. Not a "fun" part of the business, but crucial to your success. Agents also need to better educate their clients too...

Hopefully some others will weigh in. Best of luck!

I agree with Jason here on first working with your insurance carrier before contacting a public adjuster. Give them a chance to make good on the insurance contract they have with you. 

If you do end up hiring a public adjuster, make sure they are properly licensed and don't ever sign something that you aren't 100% clear on or that you haven't run by your legal counsel. Unfortunately, there are scammers out there looking to take advantage of someone who is already in a difficult position after experiencing a loss. Not saying that everyone is, but just be wise...

Also bear in mind that their fee will be at least 10% of whatever settlement you end up with... I know that they will probably say that since they will be able to get you more for your settlement that their fee will just "wash out" in the end, but it's not guaranteed that they can get you a bigger settlement... just don't let that inhibit you from being able to complete your repairs/rebuild. Best of luck and let us know how it goes. 

Would love to hear from others who have worked with public adjusters and how their experience went...