All Forum Posts by: Jason Bott

@Account Closed Sorry, I should have been more clear.  I was referring to the bars that open from the inside.  Some of the underwriters views have been that if there is a fire, with all of the smoke and panic in a situation like that, this would still be a liability they didn't want to take on. 

@Mark Mosch 

Good strategy with the Umbrella, this is definitely a  way to keep cost under control.  A few things you want to make sure of when using this strategy.

1) Make sure all locations and polcy #'s are listed under the Umbrella if using multiple insurance companies. 

2) find out where your umbrella picks up the coverage.  In the personal lines market,  Umbrella's pick up @ $250k, $300k or $500k.  So if you have a $300k policy, and an Umbrella that picks up @ $500k, you would have a $200,000 gap in coverage.

Lastly,  the demand from the insurance companies requiring RC is nationwide.  this trend won't change until the insurance market softens again.  It will be a few years.

@Blake Woodham Sorry man, anything that propels people through he air, insurance companies are going to be against;  Diving board, trampoline, zip line, etc.  You are going to be stuck paying extra premiums if you want to keep it. 

@Gary Dezoysa the insurance carriers will not want to see bars on the windows.  Doors, no problem.  Their concern is that a person will not be able undo the bars to get out during a fire.  I have not run into 1 that is ok with the bars on the window.

@Account Closed 

I just had bank force my client into a Replacement cost policy.  Even then, an ACV policy is not always the cheapest.

Next, the main property characteristics that will have a negative impact on your premiums are;  fuses or any aluminum wiring, roof older than 20 years, age of building greater than 30 years old with most very few players after 50 years or older.  If you have any of those, be prepared to pay on the higher end.

A lot of insurance companies are not willing to offer market value, which is referred to as Actual Cash Value.  It makes for a messy claim as you will most likely paying out of pocket for a % of the claim.

@Robbin Andersen 

A personal home owners policy almost always excludes business operations.  Ask your agent if this activity is not covered by your current policy.  You may be able to buy an endorsement covering this activity.

@Robert Man ,

When changing from RC to ACV, you can open yourself to a coinsurance penalty.

Your question leads to another blog post I just responded on titled,

Is some of your fire insurance a waste?

http://www.biggerpockets.com/forums/12/topics/1543...

@Derek Carroll @Seth Wilson @Dennis Tierney @Robert Man To make a fair comparison between everyone's policy, compare your "combined rate".  This is your Property premium and General Liability premium and divide by the building value.  Do not include umbrella or other additional coverage's added to the policy. This calculation avoids all of the caveats created by differing property characteristics and boils it down to premium per $100 of insured value.

Property # 1. 12 family, 10,000 sq/ft, insuring @ $100 per sq/ft = insured value of $1,000,000, Premium $4,500.  Rate is $0.45 per $100.  $375 per door

Property # 2.  12 fam, 6000 sq/ft, Insuring @ $60 per sq/ft, insured value of $360,000, Premium of $3600.  Rate is $1.00 per $100 and $300 per door.

It looks like insurance carrier #2 has the better rate, but they are actually double.  Most clients don't ever think of it this way and don't see the discrepancy because each insurance company will give you different values they want to insure to.

The best part about knowing your rate is when you go to market the insurance program, you can call an agent and say "I have a 40 year old 12 fam, replacement cost, and my current rate is $0.50.  Can you compete?" Should save you a ton of time.

@Gary Dezoysa @Michael Evans I could probably write an entire book on just this topic.  You need to take into consideration the investors risk tolerance, reserves, the current market, future market, type of property, etc.

This is definitely not a rule of thumb but a strategy some investors can use some of the time.  Keep in mind that of all fire losses, only 2% of them are total losses leading to the "total payout" I think he is speaking of.  His reasoning (I think, as I have not read any of his stuff) is if you decide to take the $ and move on, you will be paid the market value of the property based on a current appraisal.  But if you want to rebuild, you will not have nearly enough.

When this strategy works.

I had a client who's claim settled about 2 weeks ago that was a total loss.  SF, 100 years old 1300 sq/ft.  Replacement cost @ $100 sq/ft is $130k.  We insured for $70,000 as the client knows the market well and knew he would not get more than that.  After some negotiation, he settled for $60,000 + demo and loss of rents. 

When it doesn't

Let's say this kitchen fire was $40,000.  Claim adjuster will say he should have been insured @ $130k, but was only @ $70k, 46% Underinsured.  They will then deduct 46% ($18,400) from the claim payment, issuing payment of $21,600.

My client has 350 singles and doubles, so even if this happens every year, he still has a net savings to his annual total cost of insurance/self insure.  For clients who only have a few properties, 1 loss that goes bad could wipe out 10-20 years of savings.

@Robert Man 

Here are some of the independent insurance carriers who are filed to do business in KS and that I use for multi families.

Acuity

Nationwide

Auto Owners

Cincinnati

QBE

Travelers

Possibly Middle oak and CIBA, but you have to jump through a few more hoops with these guys.  Who is the most competitive right now?  It is hard to say as one company can be dominating 1 market, then be below average in another.