All Forum Posts by: Jason Bott

@Phil C. 

LLc and Umbrella insurance can both protect you, but they are not really one versus the other. LLC is the legal entity's and Umbrella is an insurance product. They can both be used in together.

Most of the insurance companies you see advertising on the radio and TV are focused on personal lines insurance such as auto, homeowners, life insurance, etc.  You will want to talk with an independent insurance agent and if possible someone who specializes in commercial property.  A few questions,

Can you ask for an umbrella policy from the insurance company currently insuring the 10 units?

Do you have all of you properties in your name?

I see a lot of discussions on when to keep properties in a personal name versus llc.  I thought this post could help investors in the planning process.

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At some point the insurance company will not allow you to add more units to your Home/Auto package and force you to put your additional properties/units onto a commercial policy. 

Here is our internal "cheat sheet" showing the # of rentals each insurance company will allow you to have on your personal insurance before moving you to a commercial policy.  By no means does this list include every company out in the market place.  But it does give enough of a cross section for you to get an idea of when you will need to make a move to a commercial policy.

* Dwelling is a single family home

* # of units is total units.Example, 4 units can be 4 SFH, 2 duplexes or 1- 4 family

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ACE--Typically like maxing out on 5 or 6 units

Acuity—12 units or 4 dwellings

Allied/Nationwide —We can take up to 8 units.

American Family – Need to have auto & home along with a commercial policy in order to consider any rentals.

Auto Owner’s—No Max

Badger Mutual - 6 would be our limit. We have to have the primary home as the supporting, not just auto.

Chartis—5 or 6 locations

Chubb—-- Our comfort level is 3 rentals at the most.  After that home office needs to review typically

Cincinnati— Will only take 5 dwellings, otherwise it would have to go commercial lines.

Fireman’s Fund—5 dwellings

General Casualty—4 dwellings

Germantown Mutual-- More than 5 locations then they need to be written on a Commercial policy. 

Harleysville -- 3 locations with a total of 6 units.

Hartford -- 4 units total, so 4 single family home, 2 duplexes or 1 fourplex

Kemper – 4 units

MetLife—4 total landlord rental dwellings with an aggregate of 8 total units.  No more than four units per dwelling. 

Pure – 2 rentals

Safeco—Up to 8 units

Secura—4 units

State Farm – 1 duplex, but has to be owner occupied.Will not allow 3 or more units owner occupied.

Travelers—Up to 9 dwellings

West Bend—4 dwellings and each dwelling can have no more than 4 units.

Western National – 5 units

Hopefully this list helps you in your future decisions.

@Curtis Bidwell 

Each state is different, but this strategy is not allowed in most states. 

It is correct.  Neglect is covered under a Liability policy, but not under a Property policy. 

@Vik C. 

To get the nitty gritty on Flood coverage, which is run by the Fed's, go to this link,

https://www.floodsmart.gov/floodsmart/pages/faqs/f...

Neglect - perfect example is a roof that is 50 years old.  If it just falls down into the house do to the fact it has outlived it's useful life, you can not file a claim to get a new roof.  Or I have had clients where an old chimney stack just falls over because it has not been tuck pointed for 50 years.  They will most likely not cover the cost to rebuild the chimney.

Intentional Acts is referring "Intentional Acts of the Insured".  Any 3rd party act is covered.

You can never eliminate All Risk.  But once you have been identified and assessed the risks, all techniques to manage the risk fall into one or more of these four major categories:

• Avoidance (eliminate, withdraw from or not become involved)
• Reduction (optimize – mitigate)
• Sharing (transfer – outsource or insure)
• Retention (accept and budget)

Ideal use of these strategies may not be possible. Some of them may involve trade-offs that are not acceptable to the organization or person making the risk management decisions.

You can probably gather why large companies hire "Risk Manager" to help manage the ongoing, never ending risk in all things a business does.

@Vik C. 

If you are looking for specific example to a liability claim that will settle for X amount, it just doesn't work that way.  There is really no limit to the possibilities of what you could get sued for.

Most large liability claims are the result of a tenant repeatedly complaining about some danger;  lead paint in bad condition, no batteries in the smoke detector, not repairing a railing on a porch.  You refusing to do anything about it, then someone gets hurt.  You can avoid most of this if you are a responsible landlord.

The largest claim I have seen was a landlord being sued for a supposedly not keeping the smoke detectors in working order.  The 2 tenants were doing drugs, passed out and started the place on fire, and they both died.  The family came after the landlord for $2.3M.  $0 was paid on the claim.

Common Exclusions on  property policy,

•  Ordinance of Law
•  Earthquake
•  Flood
•  Power Failure
•  Neglect
•  War
•  Nuclear Hazard
• Intentional Acts

Hope this gives you a little more to work with.

@Vik C. 

The first thing you need to be sure of is that you do not have a "Homeowners" policy covering a rental.  A "Homeowners" policy will typically exclude any business operations, ie renting the premises for money.  You will want to make sure you have a policy that is rated for the business/commercial exposures of a rental property. 

Exclusions that may be in a policy would be discrimination, sexual harassment, Intentional/criminal acts on your part.  The discrimination and sexual harassment can be picked up by other policies.  The criminal acts your on your own:)

A deductible will be a set amount like $500 or $1,000.  It will not be a % of the loss.  Your Umbrella may have a deductible as well.

Make sure you work with insurance broker who has experience in commercial lines, not just personal lines insurance. 

@Amanda Hoening 

I'm sorry as I did not articulate my point correctly.  I was referring to your statement,

"requiring a tenant bring me proof of renters insurance before signing a lease in the future."

2 considerations,

1)  When you start to require to see proof of coverage you establish a precedence of making sure the coverage is in place for the renter.  So once you start to track it, you are committing to continue to track it for the term you rent to that renter. 

2)  If you stated the renters coverage was "good" at the time of rental, but then there was some shortfall in coverage.  The client can state that you told them that is all they needed and you should cover the shortfall. 

Both of these points unnecessarily open you up to vulnerability if you go to court.  No sense in going through the extra effort when it could be self defeating. 

That being said, you may want to talk to your lawyer who knows IA law to give a specific coarse of action.

I hope this mouth full was helpful.

@Will F. 

NREI has the best program for your strategy.  I will send you specific contact info in PM.

Traditional policies require you to purchase a combination of polices depending on the stage the project is in.  Vacant to Rehabbing to rented or back to vacant when finished.  Each of these stages is a separate policy and usually requires a 90 day minimum premium payment.  The NREI policy covers each stage of the process without having to start and stop policies.

Good luck!

@Kirk R. 

You will definitely need to change the policy on the property you are no longer living in.  This will be come a true rental, and may be able to be added to the USAA policy depending on how many rental units they allow.  Most personal insurance companies will have a max of 4-5 units.  Then 5+ will need to be added to a commercial policy.

As @Jeff Rabinowitz 

states, once you move from the occupied property to the rental, your "stuff" at the rental will change from "Personal Property" to "Business Personal Property".  A homeowners policy automatically includes Personal Property at 70% of the building limit on the policy.  A rental policy does not have an inclusion and your Business Personal Property limit will need to be added as a separate limit.