How to Phase in Landlord Insurance Policy

9 Replies

My 9 unit MF is about two weeks from being ready to rent.  I have run into a bit of a snag concerning insurance.  My agent says that I can't put my landlord policy in place on the 5 unit building until I have at least 3 tenants (unit needs at least 30% occupancy before it is no longer considered vacant -- I currently have a vacant building policy on it). The 4 detached units are not an issue because I can add them to the landlord policy one at a time.

How do you usually handle a situation like this on attached units when trying to meet the occupancy rates for a landlord policy?  

Should I pre-lease until I get three tenants and have them all move in at the same time -- say July 15th or 30th?  Or just put tenants in one at a time and keep the vacant policy in place until I have enough tenants to also put the landlord policy in place?

@Account Closed  

I generally keep my builders risk policy or vacant policy in place while overlapping the landlord policy.  I do this as soon as the first tenant moves into the building.  I've talked this over extensively with several brokers.  If the intent is to fill the building after renovation then most insurance companies will honor a claim.  It is a grey area especially for smaller policies.   I generally do this until I reach the % of occupancy needed for the insurance company.  Then I can drop the builders risk policy (or let is run out) or the vacant policy.  The extra cost is worth the peace of mind in my opinion.  Generally theft is what I am most worried about on a vacant building.  

@Chris Winterhalter  that's what I wanted to do, but my insurance agent insists that I can't put my landlord policy in place until I have 3 units occupied.  Maybe I need to shop agents again???

@Account Closed  

Are you working with an insurance broker who works with multi-family investors?  Get some recommendations from the broker who sold you the 9 unit deal and any other brokers you deal with.  Also I would reach out on BP to the multi-family investors in Dallas to get recs.  Is your current insurance agent only working with one insurer?  They might have certain regulations. 

@Chris Winterhalter  He's working with multiple insurers because he gave me several quotes.  And he does multi family quite a bit, at least according to him.  He was referred to me by someone I trust so I feel pretty confident in his abilities.

But, he is also a little upset with me because I used another agent for my vacant building policy.  But, the policy was $1000 less for 3 months with the same coverage.  This could be part of the problem... he may just not want to work with me anymore.  

@Chris Winterhalter

He's pretty much refusing to issue the policy until I have 3 tenants (he checked with the insurer also).  I guess I don't really have a choice but to keep my fingers crossed and hope nothing happens that wouldn't be covered while I only have one or two tenants.

I am going to make a few phone calls today to see if I get the same response from other agents.  

@Account Closed  

I would strongly suggest you to not fill a single unit without a landlord policy in place.  It's a risk that isn't worth the reward.  Talk to other insurers and brokers.  Try a Farmer's agent...their policies are a little more expensive however you might be able to get a good quote.  

@Chris Winterhalter  

Thanks! I will make some calls today.  I can't imagine that new apartment complexes need to have 30-50% occupancy per building before they can put a landlord policy in place.... I just need to find the right insurance agent.  At least I still have a few weeks before I can start leasing.

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