All Forum Posts by: Tim Norris

If you have a $75,000 house, you have a $75,000 property risk...what is your liability risk at that location?  If you can afford the $75,000 risk and/or are comfortable self-insuring it, do so.  The liability risk could be zero, but it could be $500,000---or more.  Point is, you know your maximum property risk, but not the maximum liability risk. 

Many personal umbrella policies will exclude "business pursuits", so don't assume garnering the policy will ensure you have what you need. There are some recent threads on BP that discuss these issues in greater detail as well. Hope this helps.

I've made a few posts on this previously, so I will keep it short/sweet here. It's not a matter of either umbrella liability or an LLC (or vice versa). They work in conjunction with one on another as a part of an asset protection strategy. I think of the LLC as your "castle walls and moat" and the insurance as the "archer in the tower". They work well together, but not fully alone. There are a few longer threads on this subject, if you use your forum search tool. Hope this helps.

Thanks for the referral @Eric Renney.  For the record, our site is www.nreinsurance.com.

Hope everyone had a nice weekend!

Tim

I'd echo Jason, and rely upon your current agent.  Doesn't seem to me that those values for 9300 sf are out of line (and may seem light for a reconstruction value)...

@Anissa Sinissi, as the DRLP (Designated Responsible Licensed Producer) for us in Michigan, I have been licensed there since 2002 (http://www.dleg.state.mi.us/fis/ind_srch/ins_agnt/insurance_agent_license_history.asp?id=0280278&lic=NR).  

Prior to a merger that occurred in 2011, the Program was written under a different name and was written under "Wrenn, Inc":  (http://www.dleg.state.mi.us/fis/ind_srch/ins_agcy/insurance_agency_detail.asp?id=0093626)

Not every state requires the agency to be licensed, as far as I understand (assuming a producer is licensed there, of course).  If Michigan has or hasn't in the past, or does now, I am not sure.  If they haven't, we may have simply submitted the agency license as part of our annual renewal.  As you can imagine, licensing rules are complex and vary considerably by state.  Accordingly. we use a third-party to ensure our compliance with any/all licensing issues (and pay them pretty well to do so):  

http://www.supportiveis.com/.

If you have any further concerns as to our/my ability to transact business there, I'd suggest you contact the Michigan regulatory authority.  Hope this helps.

TN

"Fishier" is a bit strong, "fluff" I may give you.  :  )

Many carriers do require at least an initial quarterly payment to initiate coverage.  And many have minimum earned premiums of 90 days.  This is very true for insurers who offer coverage for vacant and or rehab properties.  That which we term a "deposit" is fully refundable with no strings, other than any outstanding premiums due at termination of the coverage.   They are really in place to ensure that a participant in the Program doesn't unintentionally lapse.  In a reporting form Program like ours, inability to report locations and pay by a certain due date could void coverage.  Thus, the deposit allows some leeway that is typically perpetuated by what most know as a "grace period".  Such deposits in no way ("Juicy" or otherwise) build our reserves. 

As for the $45/$65, you are correct.   It would be difficult to rebuild for either.  However, these are simply values/benchmarks to garner ACV and RC coverage respectively in our Program.  They have nothing to do with the cost to rebuild. Briefly, RC coverage allows the recoupment of depreciation in a partial loss settlement.  ACV does not.  Most property claims are NOT total losses, and most investors would or do not rebuild when they occur.  Accordingly, this is a benefit to most.  Many folks think "Replacement Cost" coverage is equivalent to what it costs to rebuild.  A reading of the policy (we all read them, right?) dispels this quickly.   If the investors intent is to rebuild, then we always recommend to insure to a value you that allows this.  

Tim

No worries.  We were based upon 5 locations and only comparing the insured values.  In my mind, "apples-to-apples" entails much more.  As to which I alluded and or indicated we typically promulgate these "differentiators" (of course some/many may not apply to you specifically, and we've already addressed a few here):

• Co-insurance doesn't apply at property insured to at least $45/square foot
• Replacement Cost coverage is garnered at $65/square foot or more (most carriers are at least at $80-100/square foot required)
• We can create a coverage and benefit package that is very specific to your business model. Not “off-the-shelf” as most…
• For our Lender clients, we WILL NOT allow a location to cancel without your acknowledgement
• No minimum earned premiums---you only pay for what you need on a month-to-month basis ("reporting form"), with minimal deposit/down-payment
• Company principals ARE also real-estate investors.
• For Property Management clients, the ability to aggregate, yet monitor/track insurance by location...
• Can cover LIABILITY only, if desired
• Inspections not required for most locations
• Occupied, vacant and renovation properties can be included on the same schedule/policy
• We can insure multiple owner/controlling entities under one schedule
• Offered as one of many membership benefits of Professional Real Estate Investors and Managers Alliance (www.preimaonline.com)
• Coverage is available in all states
• Coverages are underwritten by AM Best "A" or better rated insurers such as Lloyd's of London, Allianz, National Fire & Marine Insurance Company (a Berkshire Hathaway company), Ironshore, and others...
• Theft coverage on vacant locations may be available
• Claims administered by McLarens Global (www.mclarens.com)
• Coverage available for LLCs, Trusts, Corporations, etc...
• Coverage available for non-US Citizens

Again, many of these may mean little to you.  And as to which you alluded, typically those with "bad experiences" tend to communicate them much more than those with good.  We do currently insure about 8100 account holders with nearly 42,000 locations across the country.  Some of our testimonials are online: http://www.nreinsurance.com/who-we-are/testimonials (We have many more on file here, if you'd like them.  Also, as has been very much discussed in this specific thread.  NREIG/AGM is not the insurer.  Many of the experiences that have been not-so-enjoyable are a result of policy and contractual issues with the insurers that underwrite the Program.  No different than experiences other would have with their insurer. 

Hope this helps!

TN

****This is not a solicitation, by the way, admins!  :  )

No offense taken, it's just that the comparison of our Program and AMIG's offering is not on an "apples-to-apples" basis---which is completely fine.  Especially pertaining to pricing, as the proposal we sent was based upon five locations, not the 100 or so you have.  As you would imagine,  pricing for 100 properties is usually much better than 5.  I re-proposed based upon this, and on the one locations (assuming we did all 100), the cost was a little less than $100 difference total.

As for "co-insurance", here is a layperson's/simplified synopsis:

What is Co-insurance?

“Co-insurance is a policy provision used to encourage you, the insured, to purchase and maintain insurance to an acceptable value. The Co-insurance clause will state that you must carry an insurance limit on the property in an amount greater than or equal to a certain percentage of its total reconstruction value. The most common requirements are 80%, 90% or 100%. In a claims situation, the reconstruction cost of the property would be determined at the time of loss. If the amount you are insured to is less than the required amount, based on percentage, then the difference will be levied against your settlement in addition to the deductible and any applicable depreciation." 

Part of the reason that AMIG requires higher insured values (in many cases much higher than the actual value of the property) is to avoid any penalties as described above.  In our Program, as long as you are insured to $45/square foot (which is ACV--$65 for RC), there is NO co-insurance requirement.  Granted, if the value to rebuild your location is $200,000, then by all means, insure it accordingly, especially if your plan is to rebuild it.  However, if the actual value (to sell, for instance) is much less, as long as you avoid co-insurance and garner RC claims settlement parameters (by insuring in our Program as I just described), you can further drive down your costs without sacrificing needed coverage/protection.  In other words, if your location is "worth $100,000, and $100,000 of coverage meets our co-insurance waiver provisions, insuring it to $200,000 is really just costing you additional premium of which you'd receive no benefit (unless your property is in a "Value Policy" state, which Colorado is not, last I checked).

Sounds like you've had a good experience with them. My partner and I used them in Ohio for a few years (over 400 locations), and also had similar experiences. About 4 years ago or so (in Ohio, at least at that time), they changed their underwriting guidelines, including requiring higher limits than "realistic" property values and inspections, so we switched.  Hope this helps...

Originally posted by @Charles Marchiondo:

I'm with American Modern for the last few years.  We have a few "Master Policies" with them and their prices are much lower than National Real Estate Insurance Group.  I just got a sample bid on 5 of our homes from them and they are easily twice the cost. $100/month for a $200k home with a $5k deductible seems out of line.  We are currently paying about $600/month.

 AMIG is a strong company and we actually represented them for many years.  Part of the offset to their lower costs (which are very geographic, by the way), is the application of co-insurance.   (See many posts here on BP that describe what it is and how it works).  They also are limited in how they treat vacancies.   (At least they did when we used them).  Lastly, and this really applies to those with many locations, they work on an endorsement-basis.  In other words, unlike the reporting form we use, all changes need to clear their system in a slightly more labor-intensive manner.  There are a couple other idiosyncratic differences that escape me as I type this on my smartphone...

As for pricing,  we likely will never be the lowest, but our offerings are driven by costs that create stability in pricing.  We have not taken an across-the-board cost increase in 10 years or so.  This is typically very appealing to investors with large portfolios.  Hope this helps.