Buying 1st ever investment - a 4PLEX - need insurance guidance!

Mesa, AZ · Member since 2018 · 58 posts · 4 votes

I'm looking to close the escrow in the next 3 weeks. This rental property title will be under a newly established LLC and I'm going through the loan procurement currently. Need guidance as I'm confused:

1) what all insurance should I consider for safeguarding- I have heard about - business owner insurance, property insurance & landlord insurance? On the top an Umbrella Policy?

2) What is a reasonable limit? It's a $425K purchase price. Some say 2mil /4mil etc

3) What all things should I look out for when comparing insurances from one quote to another?

4) Any recommendations - insurance companies or agents? I don't want to spend as it comes out of my cashflow at the same time want to be able to sleep at night.

Thank you in advance !!!

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Bjorn AhlbladPro Member

Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes

Most of my insurance is from Farmer's. I have been well served by them. I'm sure there are several offices in your city. For liability insurance cover you assets. If your net worth is 2 million get two million etc.

You want a company that is price competitive and pays claims. Never buy the cheapest. Check feedback online.

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Bjorn AhlbladPro Member
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
7y
Most of my insurance is from Farmer's. I have been well served by them. I'm sure there are several offices in your city. For liability insurance cover you assets. If your net worth is 2 million get two million etc.
You want a company that is price competitive and pays claims. Never buy the cheapest. Check feedback online.
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Nathan GesnerBusiness Member
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
7y
I've had good experience with USAA (personal favorite, if you qualify), Farmers, AllState, and State Farm.
CLICK HERE for a basic description. Educate your self on the difference between Replacement Coverage or Actual Price Value because that can have a big difference in results when you file a claim.
The DIY Landlord Book4.7247 Reviews
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Vibhu Arya
OP
Mesa, AZ · Member since 2018 · 58 posts · 4 votes
7y
Thank you for the responses. Is this okay?
1. 1) what all insurance should I consider for safeguarding- I have heard about - business owner insurance, property insurance & landlord insurance? On the top an Umbrella Policy?
*Liability Insurance to have
1. 2) What is a reasonable limit? It's a $425K purchase price. Some say 2mil /4mil etc
* 2 mil - but is it all my personal asset to consider or just the rental property worth (which is approx $425k)?
1. 3) What all things should I look out for when comparing insurances from one quote to another?
1. 4) Any recommendations - insurance companies or agents? I don't want to spend as it comes out of my cashflow at the same time want to be able to sleep at night.
I do not qualify for USAA but I'll check out Farmers, All State & State Farm
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James Kojo
Rental Property Investor · Scottsdale, AZ · Member since 2016 · 184 posts · 223 votes
7y
@Vibhu Arya : for 4-units and below, you will most likely want to use a residential policy similar to the one you may have on your primary home. Those are offered by most of the well-know providers that you probably already of (Farmers, State Farm, Amica, etc.)
The lender can provide specific requirements for hazard coverage, but it mostly around protecting them, not you, so the minimum requirements may or not suffice for you.
One difference between what you might get for your personal residence vs your quad is that you don't need to insure the contents, and you probably want higher liability coverage. You still want to buy the normal hazard coverages (fire, wind, hail, earthquake, or whatever natural disasters tend to occur in your area.)
Another difference is that you probably don't need any loss-of-use coverage (i.e. hotel expenses if your house is damaged.)
Most residential providers will have a policy that is tailored more towards rental homes in the way that I describe above. They may call it a "landlord" policy, but is usually just the same residential policy with tweaks in the coverage limits. That might be a good starting place.
On commercial policies, there is often a provision for loss-of-income, which *I believe* is typically *not* found on a residential policy, so you may need to budget reserves if the quad becomes uninhabitable while it's being repaired. You can self-insure over this possibility, or ask the provider if they have some provision over this.
In terms of liability coverage, a general rule of thumb is have enough liability to cover your net-worth. The thinking there is that they probably can't take what you don't have! :)
Hope that helps!
James Kojo
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Vibhu Arya
OP
Mesa, AZ · Member since 2018 · 58 posts · 4 votes
7y
Thank you, James, this is very helpful!
Does it make a difference if the policy is in my name versus in the name of LLC that I have established for this rental?
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Matt Moylan
Insurance Broker · Kansas City, MO · Member since 2017 · 370 posts · 127 votes
7y
I always suggest working with an insurance broker. Insurance Brokers are able to shop your insurance policies across multiple companies.
Not that State Farm, Farmers, Allstate, USAA, or any of the other "big names" are bad companies, they are limited to looking at only their companies rates. Something to consider.
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