When I started acquiring more properties a little over a year ago, I talked to a couple different insurance agents/ brokers to see what they could do. One of them answered his phone, responded to me quickly, gave me the best quote and I went with him. Since he is a broker, he can shop the properties to different companies. I thought this would be helpful since I purchase a mixture of really old sfh and mfh. So I was feeling good. He has written 6 policies for me over the last 15 months and I was content.
Then last night I was looking over some numbers on a property I'm considering buying. It was actually a spreadsheet of about 12 properties in a portfolio and the guy wants to sell a couple. I looked closely at the annual premium on his insurance and its less than half of what I pay on a similar home. I started looking at the other properties and across the board his insurance premiums are about half of what I pay on similar homes. $30 a month isn't a big deal. But $30 per month multiplied by 6, 10 or 15 properties starts to add up.
So I called him up today to find out his trick. He assures me he has no trick. He was dropped by another insurance company a few years ago and found a small broker in town that would work with him. So I now have the name and number of his insurance person and I'll give them a call on Monday to figure out the trick.
Where did I go wrong? Why am I paying double what he is paying? My policies are not top-of-the-line by any means. For the investors out there with 10 to 20 properties, where have you found the best insurance rates?
$30 a month x 6 properties x 12 months = $2160 a year makes it worth my time to shop my insurance.
You might be looking at the difference between ACV and RCV in the coverage. Might also be that he had higher deductibles.
Like Steve, I was going to say he might have different deductibles or different liability coverage, or any number of things. Just be sure to compare coverage closely. Sounds like you may have found yourself some sweet savings though!
Check all the different "amounts" to make sure it is really apples to apples. Also make sure that in the case of an incident they have a good payout ratio.
This happened to me too. My premiums on some homes went from $75 a month to $30 a month. A big difference is the way the policy is written. I try my best to get cash policies. If I pay $50k for a place that's worth $75k, just give me a cash policy @ $75k so I can repurchase a similar asset. I really don't care that the computer program they use says the replacement cost is $375k.
Foremost is a good company to work with (they are a Farmers sub). As previous people have stated, be very specific around what you are looking for. For example, when I look for insurance, I am looking for bare bones policies which means market value coverage (not replacement cost), high deductible of $5,000, no rent loss coverage. I go with $500K liability. After dropping all the extras I noticed that many of my premiums were cut by a third. It's all about what you are looking for though. Some people want more protection.
Thanks for the feedback.
@Ben Stout My broker and I have fought with the insurance companies' calculators in the past. I typically buy for around $25,000, put $20,000 into them and then they appraise around $60,000. Then my broker types 1800 sq ft, 4 bed, 2 bath into the calculator and the insurance company wants to insure it for $250,000. If it burns to the ground, I just want enough money to pay off my note with the bank and clean off the lot and sell it.
@Chad Lopes Thanks for the details. I think my broker can write Foremost, but he is not used to writing policies for properties in this range for investors. So I think I can give him your ideas (market value, high deductible) and see if I can find some savings with Foremost. Do you know if Foremost has a limit to the number of properties they will cover?
I ultimately like the service I have been getting from my insurance broker and would like to stick with him. So if I can stick with him and still realize the savings, I'll be happy.
Not sure how many properties they allow but I know some investors where they have covered over 50 properties, so my guess is that they have a pretty high threshold.
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