All Forum Posts by: Michael Norris

@Rachelle McCreery I'd agree that rate seems high from Foremost but I'm comparing Ohio rates versus what you are getting in Texas. Not all agents are created equal and you can get quotes from different agents repping the same company and get totally different prices. 

For some investors their personal credit score is average or below average from using "creative financing". If that is the case the agent could set up the quotes without using a SS#. For others entering in their SS# with the quote could help lower the rate.

Any previous losses in your history matter as well as the age of the home and the zip code the property is located in.

There are lots of companies out there - try to find an agent familiar with RE investing who may be able to find you something better. Good luck!

You need a vacant policy or course of construction policy while renovations are going on. Then you need a homeowners policy while you live there. When you rent it out you will need a landlord policy.

Sounds like you've been told some companies will not write a standard homeowners policy if the house is owned by an LLC...true. Some won't and some will.

Some companies will write the policy in your name and then add the LLC as additional named insured. If you have business partners who are not spouse or close family I would not suggest the last method (your name + LLC as additional insured).

You have a square peg / round hole situation which is always tricky in insurance. I'm assuming the house is furnished being a model home and that the builder is "renting" it for purposes of showing the house to prospective buyers in that development.

If the above is correct it's possible the buyers could insure the house as a vacant property.

I think an attorney should write up something for both parties to sign showing the builder assumes liability while showing the home. If someone falls down the stairs or something like that the property owner would probably be named first on the lawsuit regardless of what the builder intends. 

Who owns the furniture? Assuming the builder owns or rents the furniture they should talk to their agent how best to cover the furniture or the rental company they got it from. If the buyer owns the furniture they could add personal property coverage for the furniture to the vacant policy.

I'm not aware of any company that would insure what sounds like "wear & tear" on those old pipes. You may be able to buy some kind of service line coverage from your utility company but most likely nothing from an insurance carrier.

I agree with @Jason Bott that you are probably well taken care of.

Depending how you have the policy set up they may pay out a couple different ways. Make sure you ask lots of questions.

Since it's a total loss you may get a lump sum check for an ACV valuation (depreciated amount) and if/when you rebuild you may be able to access the portion of the claim they held back.

Example - round numbers to make it easy. Let's say the building is insured for $100,000. On a total loss they may use a depreciated amount - something like $80,000 and hold $20,000 in reserve. Once you are completed with the rebuild they will pay out the other portion.

If you have the building insured for less than the full reconstruction cost amount - say the estimated amount to rebuild is $150k and you have it insured for the same $100k - they will probably just cut you a check for the full $100k since you are insured for less that what it will cost to rebuild (the way it was not the newly required elevated construction)

In addition to those examples above you could ask for loss of rent reimbursement and if you are forced to have extra cost to rebuild up to code (elevated) then you may have Building Ordinance & Law coverage that could pay something towards that extra expense.

*If you have the Building Ord & Law coverage it's probably 10% of whatever you have the building insured for.

If they hit you with a depreciated amount on first payout - make sure they know about any recent updates you have made to the property like upgrades to kitchen, bathroom, etc that could reduce the depreciation factor applied.

Good luck

Could you get sued - yes. For anything at anytime.

Will they win - probably not but you will foot the cost of defense without proper insurance.

How can you avoid getting sued? Have a quality lease in place spelling out all the do's and don'ts and who is responsible for what. Make sure you are not discriminating against any protected classes. And make sure when you do repairs or remodels you do everything up to code.

How could you lose everything? Negligence.

If something bad happens and the tenant can point to some level of negligence on your part then it opens you up to punitive damages and can even break the protections of an LLC.

Example: You or your property manager has a non-professional electrician (side job, no insurance, not bonded, not licensed, etc) make a repair that later causes a fire. The tenant called you to say something was funny, sparking, smelled smoky, etc and you didn't do anything about it.

The issue leads to a fire and the tenant, their family, or their guest is injured - you would be wide open to a punitive lawsuit.

Or say the tenant has a dog that is menacing neighbors, you get notified about it and take no action. The dog then goes on to bite a neighbors kid in the face. Yes the tenant's renters insurance would be first in line to pay for damages (you require your tenants to carry Renters insurance right?). Once the limits of their policy are used up or they don't have Renters insurance - guess who is also getting sued?

That's right - you. Since you were warned about the dog being a menace and didn't take action you could be opened up to being included in the lawsuit.

I hope that helps.  

Farmers owns Foremost Insurance but they operate as two separate companies. Only a Farmers agent can sell you a Farmers policy but Foremost is sold by both Farmers and Independent Agents.

Foremost specializes in vacant and landlord properties as well as boats, RV's and other motorized toys.

@Don Spafford I'll send you a PM - I won't try and steal you away from another agent but I'd be happy to answer any questions you have. Cheers!

Good question - I remember a couple years ago the outer banks lost electricity for an extended period of time and people were getting calls not to come so this isn't that far fetched.

On the personal lines Vacation / Short Term Rental policy I have not seen that it covers loss of income from something off site like the power being out, water shut off, etc which is what I think you are referring to. Like others stated above - If the  property was damaged and under repair then yes you should be able to collect for loss of revenue on that policy.

Most commercial policies can include an endorsement for that type of loss but I have not seen a dedicated commercial policy for short term rental from any of the carriers I deal with (yet).

I hope that helps.

Based on the info provided I am assuming you have a traditional single family house - not a duplex.

You could purchase a landlord policy to cover the building and your landlord liability, then buy a separate renters insurance policy for your personal property and personal liability. You could do that through a company like Foremost. Your current agent could probably do that too they just didn't think of it.

On a long shot - Farmers Insurance could set you up on a standard homeowners policy with an endorsement for roomers/boarders which costs almost nothing extra. However they are just opening up in Florida and there are zero to a maybe a few agents there yet probably located in the central part of the state away from the coasts.

There is some great advice above from other posters. I'd suggest looking for a local landlord association you can join. It's typically not very expensive and once you get to know people you could probably get tons of free advice and access to local vendors for all things related to property investment.