My last post generated some great discussion regarding property insurance.<\/p>\n
In that post<\/a>, I went over ten tips regarding what can be a very frustrating part of our industry.<\/p>\n In this post I want to expand on one of points I made previously and that is:\u00a0I only get enough insurance to get the lender out of the way and the property cleared.<\/p>\n First, let me point out how I view property insurance.\u00a0 Property insurance<\/a> is there to protect me from catastrophic events.\u00a0 It is not there for anything less.<\/p>\n What is a catastrophic event?\u00a0 In my opinion, a catastrophic event is something that destroys or nearly destroys the entire structure like a major fire or tornado.\u00a0\u00a0 Therefore, the only time I am ever going to make an insurance claim is if something catastrophic occurs.<\/p>\n Over the years I have dealt with many insurance companies and agents.\u00a0 I have watched them change the rules on me without warning.\u00a0 I have watched them drop my coverage and leave me hanging.\u00a0 I have watched them as I have made legitimate claims and then significantly raise my rates on everything else.<\/p>\n What\u2019s more, as I have grown and developed my business, insurance has become more difficult to obtain and maintain. \u00a0As you grow in the real estate investing business you will not fit the mold anymore<\/a>.\u00a0 You will be seen as a risk. \u00a0Some insurance companies will begin looking for ways to get rid of you.\u00a0 They will be waiting for one slip up or claim.\u00a0 It is just too risky for me to jeopardize my coverage by making claims. \u00a0I just do not want to rock the boat when it comes to insurance.<\/p>\n So, knowing this…<\/p>\n I get as little as I can get away with to keep my costs down, which generally does not include full replacement cost.<\/p>\n I am not looking to get a large settlement.\u00a0 I am not looking for insurance to replace my roof after a hail storm.\u00a0 I am not looking for insurance to replace my stolen HVAC equipment.\u00a0 To me, insurance is not there to pay for repairs. You may call me crazy, but I can\u2019t afford to rock the boat.<\/p>\n As I said, insurance is there to protect me from a catastrophic loss.\u00a0 Thus, I want it to pay me to get the lender out of the way if the property can no longer provide income.\u00a0 I also want it to pay me to get the lot cleared.<\/p>\n From that point, with the lender out of the way, I can move on and decide what to do.\u00a0 I can sell the lot or perhaps get a construction loan to rebuild. \u00a0Furthermore, I also carry high deductibles.\u00a0 Since I am simply not going to make small claims, why not have a high deductible?\u00a0 It costs less and improves my cashflow<\/a>.<\/p>\n Does this method mean I need cash reserves?\u00a0 You bet it does.\u00a0 Does it mean that I am sort of self-insuring?\u00a0 Yes, I think it does.\u00a0 But because of my experience with the insurance industry, this is the way I choose to run my business.<\/p>\n Can I do this all the time?\u00a0 No.\u00a0 Some lenders require full replacement cost and lower deductibles.\u00a0 Therefore, I have to carry what they dictate. \u00a0That being said, don\u2019t just take my word for it.\u00a0 Be sure to check with your lender before changing your coverage and also be sure to discuss your needs with your trusted insurance agent.<\/p>\n Again, insurance to me is to protect against catastrophic loss.\u00a0 I am not looking to score a big payout. \u00a0Instead, I just want everyone else out of the picture so I can move on.<\/p>\n","protected":false},"excerpt":{"rendered":" My last post generated some great discussion regarding property insurance. In that post, I went over ten tips regarding what can be a very frustrating part of our industry. In […]<\/p>\n","protected":false},"author":726,"featured_media":54339,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5524],"tags":[186,763,190,4012,59,2049],"class_list":["post-54295","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-investing-for-beginners","tag-cashflow","tag-insurance","tag-landlord","tag-property-insurance","tag-real-estate-investing","tag-replacement-cost"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/54295","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/726"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=54295"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/54295\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/54339"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=54295"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=54295"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=54295"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Why Do I Hold This View?<\/h2>\n
What Type of Insurance Coverage do I Get?<\/h2>\n