All Forum Posts by: Derek Kartchner

We represent a number of insurance companies, and I don't know of an company that will cover tenant damage. Basically, it's the insurance companies telling you that you need to manage the risk of tenant damage by vetting the tenant. I know, I know, it's not the easiest thing to do. But, it is important to understand the insurance company's standpoint, which is if they covered you for tenant damage your would have less of an impetus to do your due diligence, and that puts them in a bad spot. 

Insurance can be purchased in the name of the LLC from a variety of insurance companies. Many that are often mentioned in the forum. For example, both Foremost and American Modern offer coverage for LLCs and list the primary member of the LLC as well as Named insureds. I personally, in using these companies, have never seen a difference in premium simply because it is an LLC. However, that could change on the state. If the state uses "insurance scoring" and can't run credit on the LLC, you might see a slightly higher price. But I have not seen that... that price increase is simply a hypothetical.

Totally depends on what you mean by rehabbing. A good rule of thumb is that if you don't plan on "cracking the shell" (I.e. opening your home by putting a hole in the side of it to add on, replacing exterior doors and windows, etc) then you may be fine with a vacant home policy. Another good case would be major renovation of electrical or plumbing systems that might create a higher risk of loss (say a fire or a flood from new plumbing) than say replacing carpet and painting.  If you do plan on "cracking the shell" or will have a lot of materials lying around, then the way to go would be a builder's risk policy. Just remember that the builder's risk policy will usually end upon completion, in which case you lose coverage and will need to get a more permanent policy in place. Regardless of the occupancy.

From an insurance standpoint Florida and coastal Texas may have significantly higher insurance premiums due to the hurricane risk. I am not saying completely discount the areas, I am sure that there are many that have done well in both areas, but just calculate higher insurance rates into your business plan.

From an insurance standpoint pools aren't a problem per se, but you will need to have some risk management in place including at least a 4 foot fence with a self latching gate. With these in place there will be companies that will insure you with out any issue. That said, be aware of any limiting endorsements. By that I mean you may buy a given value of liability, thinking you have that limit for all situations only to find out you have a lower limit for pool liability. Just something to be aware of and look for.

1.Why do different brokers quote different rates, different dwelling values with the same carrier?

Rates are a function of the coverage offered. So, different rates may exist even between the same company. This could be because there are different dwelling values, different values for landlord property, other structures, liability limits, etc. Also, one could be rating at an Actual Cash Value another for Replacement cost. Some agents quote it with every bell and whistle possible, others quote it with stripped down coverage so as to not "scare off the client." Many times the agent will have the intention of up selling you. Same coin different side. 

Think about it some people want the the best coverage to protect their asset, others only focus on price. Different coverage = different rates. 

As far as Dwelling values go Agents have "home cost estimators" provided by the carriers, BUT those things have a LOT of wiggle room. And usually the carrier will accept the a home with in a range. 

That said, if you are expecting your insurance agent to pull out the correct value for your house you are going about this all wrong.  You should know the value of your house and tell the agent want you want it insured for. Your agent has never seen the home and probably has no clue. But you have. So, what would it cost to rebuild the home? Its not hard to figure that out. Look at the appraisal, talk to a contractor, or a real estate agent in the area, remember you can't insure land, so focus on the cost rebuilding the home. Then tell your agent what you want to insure it for. 

2. Why do insurance companies not offer multi SFs discount?

Some do. Usually its a multi-policy discount and that, from what I have seen is usually a 2-5% discount depending on the carrier and area of the country. 

3. Why are portfolio insurance twice the price as getting many single policies

I assume you are talking about bundling all your rental property policies together? Maybe the single policies have really low limits of coverage? For example it could be you are getting 1 Million dollars of liability on your "portfolio" policy, but only 100K on a single policy? Not sure... on policies where we are scheduling coverage we usually see lower rates. 

@Emili Webster I would find a new insurance agent/broker. There are LOTS of options out there that don't have these types of limitations.

As far as your primary insurance on the rental properties go, many companies will allow you to insure as many as you want (I know of policies of 2,000+ units). There are even companies that start to give serious price breaks at about 10 properties (for example American Modern does that). Foremost will allow you to add as many as you want to one policy, although I don't know of a major price break or discount that isn't simply just the multi-policy discount. 

As far as the umbrella piece, there are some limitations on certain types of risks. For example, I know of one personal umbrella program that limits 4 units in any one location, BUT that that allows for up to 30 residential units in Texas under the umbrella policy. There are other umbrella programs out there as well. While that doesn't help you if you have an apartment for many investors investing in single family homes, duplexes and 4-plexes its perfect. 

I would tell you that ,I as an insurance agent, pay for leads quite frequently. Renters insurance isn't typically going to a typical agent jumping up and down because the premium is super low, but an agent that gets it will try to "round" the account and try to sell other types of insurance to the consumer. So it is possible, but lots of leads are scams (for example they will sell the lead to 4 agents to compete... and it sucks the profit out of a deal), and insurance agents distrust lead sources that haven't been tried. So approach some local agents, ask them if they want the leads... one of them will say yes... tell him you will send him some for free and what you want for them there after. He should be able to figure out if the leads are good, or bunk, and whether he is willing to pay for them. 

Certainly doesn't hurt to try. 

Did your insurance agent offer a Difference in Conditions policy? He probably should have whether your lender required eq coverage or not. While coverage can vary policy to policy it's something you can look at as earthquake can typically be covered On a difference in conditions  policy. There are also other options that will be reasonably priced as long as your not sitting on a fault line. 

I would suggest contacting your insurance company, NOW. They have an interest in this as it could escalate to them if you are sued. If you look at the policy contract there are duties you have as an insured. One is to notify the company as soon as is practical, usually they are asking for notification that there could be something, then clearly they want notification of summons. Muddling around trying to avoid a premium increase could get you deeper in to trouble, or open a door for a company to deny the claim (e.g. You didn't notify us, and therefore we couldn't take the proper steps).  

Also there is coverage for Medical payments which in most states is a no-fault coverage. Meaning no admission of guilt, but let us take care of you, so you don't sue us. The insurance company will have a process to protect them and you. In your policy there will probably be a section under the liability conditions that states, "Duties of an Injured Person." They would have to provide proof of claim under oath, provide copies of Medical reports, etc. etc. 

Insurance companies are experts, let them be the experts. Knowing that they are not dealing with you, but rather a team from a large insurance company may changes the tune. 

Finally, a lot of policies will say something like this (from the same conditions area): "An insured will not, except at the insured's down cost, voluntarily make payment, assume obligation or incur expense other than for first aid to others at the time of the bodily injury." 

In the most conservative stance you could read this as, go in it alone, you are on you own later, get us involved and you have our backing. Some may argue this, but if you start making concessions without the company you are opening a door. 

In the end your premiums won't go up if they don't pay out, and if they do pay out, they were probably going to have to anyway and your premiums were going up anyway (meaning that suit was going to happen anyway). It may be once the carrier is notified that they will say sit on it until you actually get sued, but at least then you have done what you need to do.