All Forum Posts by: Account Closed

The vast majority of contractors and investors do most of their work in one state (two if near a border) with an occasional job in another region. The laws affecting insurance vary significantly by state and effect how contracts are written, how workers comp claims are handled, what coverage are required to operate in that state etc.  My recommendation was that It makes sense to select an agent with an expertise in the laws effecting the majority of your business. This does not mean that you need to find a new agent every time you do business in a different state.  I would actually recommend using one agent for all of your needs who understands the policies you currently have in place and the risk management goals of your company. 

An agency with a large amount of business in one area is much more likely to have a strong relationship with regional insurance carriers who are active in that market. The underwrites at these carriers often have more flexibility to adjust their price based on the risks specific to your circumstance and often provide the lowest premium. 

 Jimmy, 

In my experience contractors errors and omissions "E&O" insurance is not something regularly held and in my opinion would not add much value to a typical residential rehab project. E&O insurance is generally held by large HVAC or electrical contracts and covers situations where there is no bodily injury or property damage. ie. If the lights in the building do not turn on because the electrical contractor installed something improperly that contractors E&O insurance would likely pay for him to go back in and redo the work.

In my opinion Builders Risk insurance is the best way to protect against damage to your property during construction and general liability is the best way to protect against damage or injury to others as a result of one of your contractors negligence. Please note this is a general opinion and does necessarily apply to your specific circumstance.

I would recommend you contact an agent familiar with your area. Underwriters appetite tends to change depending on the region so someone in your area would be much more familiar with the most competitive insurers and be knowledgeable about the intricacies of local laws etc. 

Lois, 

While this is your business decision I would caution you in buying a workers compensation policy to cover contractors without workers compensation insurance. 

First, of all this type of coverage is something many insurance companies will be hesitant to provide and if they do provide it the cost will be significant. The reason is that generally the insurance company is able to underwrite each contractor based on their loss history, safety procedures in place, etc. In this situation they would not have that opportunity and be forced to cover any number of small contractors that likely have no programs in place. 

Second, there are a number of factors that distinguish an independent contractor from an employee and paying for someones insurance would definitely not help your argument that they are an independent contractor. 

Lastly, most large condominium associations and apartment managers are going to require contractors with workers compensation insurance in order to do work on their buildings. For that reason there is an ample supply of good workers willing to do those jobs that have the proper coverage. For that reason I would really stop and think if saving a few bucks on maintenance cost is worth the risk and hassle associated.

This list is very large. I would recommend contacting an agent at one of the State Farm, Farmers, All-State type agencies and one independent broker and comparing the quotes they provide. 

I am not an expert in Florida insurance pricing but $8-$10k a year seems very high. That is almost double what it would cost in the St. Louis area. That being said some tips for lowering your premiums regardless of location include:

Wind Hail Deductible: Roof claims after a storm make up a substantial amount of insurance claims on habitation properties. This is because many owners neglect to do on-going roof maintenance and basically wait for insurance to pay for a new roof after decades of wear and tear. If you maintain your roof adequately you can increase your deductible just for wind/hail related claims which will substantially lower your premiums. 

Don't Over Insure: Your insurance limit should be based on the cost to replace the dwelling not the market value. This means you should not be including land in the limit.

Take Advantage of Discounts: Many insurance companies offer discounts for things like property manager being within 10 miles of the property, having safety features like central alarms, screening tenants, having good credit quality, etc. 

Get Multiple Quotes: If your property is a brand new and cookie cutter building carriers like State Farm or Farmers will likely provide the most competitive quotes. However, if you have an older building or past claims history you may be better off with a specialty insurance company. 

As long as you personally guarantee the loan I don't think it should matter to the bank if the property is in an LLC or your personal name.

It sounds like there are two issues here. 

1. Do I need separate policies for each building 

No. both properties can be on the same policy and liability limits will be shared. You have two options for property insurance. The first option is each building will have a separate limit and that is the most you will get for that building in the event of a total loss. The second option is to have a "blanket" limit. This is a bit more expensive but allows you to combine the replacement cost of both buildings into one limit. The advantage here is that if there is a total loss to one of the buildings that cost more to replace than your estimate you can use the entire blanket limit to restore that property. Refer to an actual policy for the details and limitations to this summary. 

2. Do I need HO-03 "Homeowners" Insurance of DW-03 "Dwelling Fire" Insurance.

Homeowners insurance is meant for a property that is the primary residence of the named insured (you). You will need dwelling fire coverage for all rental properties. Dwelling fire insurance can be an extension of your homeowners policy if the insurer allows. This is generally cheaper but any claims you have due to renters will effect your homeowners premiums for years to come. You can also purchase a separate dwelling fire policy through a commercial lines insurer. This is generally a requirement if your property is in an LLC. It is more expensive regardless but minimizes the chance that something done by a renter will effect your homeowners policy. Again you will need to refer to an actual policy as this is just a summary.

The labeling on your car has absolutely nothing to do with its insurance classification. In most occasions you can use your auto to drive to meetings, take customers out to lunch, drive to a home you are potentially purchasing etc. and there is no need for a commercial policy. 

That being said there are a number of business related activities that will likely prompt your personal insurance carrier to require you switch to a commercial auto policy or cancel your policy outright. 

1. If you are using the vehicle to make deliveries or transport tools and materials to a construction site. 

2. If you regularly let other employees or business related people drive your car for business related purposes. 

This is a non-inclusive list and I would recommend you talk to your carrier directly to verify. 

David, 

Each rental property should have a separate dwelling fire policy associated with it. In the event of a covered loss this policy covers damage to the building, loss of rents, personal property if you have any at the location and premises liability. You can generally select a liability limit ranging from $100,000 to $1 million. Many people are satisfied with this amount of coverage. 

However, You can also purchase a commercial umbrella policy that is shared by all of your rental properties. You can list as many different LLC names as you like as named insureds on this type of umbrella policy.

Obtaining coverage through your homeowners policy is generally cheaper and is an OK option for people just starting out in the business with 1-2 rental properties. However, as your business grows in size and complexity your risk exposures will grow along with it and a commercial policy likely provides better coverage for your growing business.