Homeowner's insurance on a rental house

11 Replies

Do you bundle your rental properties homeowner's insurance with your personal policies?  Why or why not?  I was thinking it would be better to have each house be on its own, to make it easier for my CPA.  Thanks for your thoughts!

My husband and I own 26 rental units, and out of those we have 2 6 unit apartment buildings, 1 mixed use building with 3 Apartments (and my office commercial space), 5 single Family houses, and 2 townhouses.  All of our properties fall under one commercial property policy.  I actually cut my insurance cost down by almost $900 a year by bundling them all together, however my bill runs around 15K a year for all that.   I would tell you it is good to only bundle your properties if they are all rental but not if it is your personal.  

Medium logo with addressLisa Doud, Doud Realty Services INC | 757295‑8007 | http://www.doudrs.com

Thank you, @Lisa Doud !  I'm still very small, but need to get new acquisition covered, so I'm shopping out the policy.  Suggestions for good landlord insurance company?

Be sure you buy landlord insurance for rentals, not homeowners.

Many companies don't write landlord policies.  Safeco and Foremost do.  Sold through independent agents.

Jon Holdman, Flying Phoenix LLC

Thank you, @Jon Holdman!  You're right.  I'm still new to the game and figuring these little things out!  Much appreciated.  :)

I would check out a lot of independent insurance agents in your area.  Stay away from the Big name State farm, All State or even farmers.  My local insurance agent is TowneInsurance a subsidiary of our commercial lender TowneBank(they hold the mortgages on our MF), but my policy is with Middlesex Mutual.  

Medium logo with addressLisa Doud, Doud Realty Services INC | 757295‑8007 | http://www.doudrs.com

@Lisa Doud  Why do you suggest to stay away from the big name insurance companies?

I am roughly managing about 200 rental units, and 90% of the time my owners call me and I explain that they need to get a landlords policy before they rent the property, and most of them say what are you talking about....  When they go to the big guys they try to over sell you and will not bundle properties together because they have a cookie cutter mold, which is usually your personal property + 2 or 3 rentals and then the cut you off on how many they will insure for you.  

Also because most people don't know how much a landlord policy should be when it is only $5 cheaper they agree to it before they even shop around.  I always tell my owners that your insurance carrier should drop your rate at least 25% because you are only insuring the physical structure of the property, and your appliances.  Remember Homeowner's policies cover Personal property..... That is why you should see that reduction in the rate and if it is not at least 25% less than an homeowner's policy you need to shop around.  

Just for FYI before we went to our single policy for our properties we had Allstate on our personal property + 3 SF rentals, Nationwide on the 2 6 units, Farmers on our triplex, state farm on 2sf and 2 Townhouses.   When we tried to purchase our last building my office, State Farm couldn't help us because they had their max liability quota meet with us.  So that is when we had to come up with the drawing board.  Now all I do is add a new property to my policy and it  no problem, just give the specifics of the property, and it is there no questions....

Medium logo with addressLisa Doud, Doud Realty Services INC | 757295‑8007 | http://www.doudrs.com

I second the opinion of finding a reliable local insurance broker. They can find you a good deal and also provide you with extra services. Mine sends me a gift certificate for B&R ice cream on my birthday every year, when even my own brothers and sisters forget about me! We purchase policies with Safeco through the broker and that serves us well.  Also, I can buy insurance directly through USAA because I am a member of USAA. They offer good products too.

Marcia Maynard, Fischer Properties | Podcast Guest on Show #83

Account Closed To answer the question about making things easy on your CPA. If you own all your properties in a single LLC, you will likely only see one line for "Insurance" on your tax return whether the properties are bundled or each on their own policy. For financial statement purposes, your CPA may break out each property separately with the related insurance cost to show you the profitability for that particular property. Even when bundled under one policy, the insurance company will show the cost of insuring each property on the bill/statement. In short, on this one, don't worry about your CPA. They will be just fine!

Medium transparent background hresJake Hottenrott CPA, Jacob R. Hottenrott, CPA, LLC | 618‑304‑1584 | http://jakehottenrott.com

Thank you, @Jake Hottenrott !  I do worry about these things, and I want it all streamlined as I go along.

Originally posted by @Gwen B.:

Do you bundle your rental properties homeowner's insurance with your personal policies?  Why or why not?  I was thinking it would be better to have each house be on its own, to make it easier for my CPA.  Thanks for your thoughts!

 As real estate investors, we have a very unique set of needs and most companies and agents out there are limited in their ability to structure things properly and even offer the right coverage in many cases.

One thing everyone needs to understand is that anything having to do with rental or any other form of passive/residual income, is considered a business exposure and absolutely needs to be separated from any of your "personal" activities.

I've been in the insurance business for 11 years and as an independent agent prior to becoming a real estate investor, I made this mistake all the time because I simply did not know, and most don't.  So what typically happens is they "bundle" your homeowners and auto and then they start adding "personal dwelling" policies for your rentals, typically with a max limit of 10 properties.  And then of course, you add a "personal umbrella" over everything.

The issue that I learned years ago after becoming a real estate investor and after spending months searching for the "right" coverage and company, is that this leaves your personal assets wide open due to you commingling "business" activities with personal, creates limitations in the way a liability claim may be adjusted and paid and also doesn't even save you money.  

What everyone needs are products, services and policy structures designed by real estate investors, for real estate investors and one of those features is a portfolio type master policy, with no location limits, with the ability to insure multiple controlling entities and properties in any stage of renovation, in all 50 states, offering agreed value, special form coverage with theft and vandalism, the ability to actually reduce premiums incrementally by aggregating locations AND do it all on a monthly reporting basis so that you and your CPA can easily see the breakdown in coverage and premium for every location.  Just to name a few little things.

That is how I have all of my deals set up, mostly flips and turn-keys, and have have done so since 2011.  If you read my about section, you can see how I got into it and my mission to help all my fellow real estate investors find the right education, coverage and company, no matter what kind of investor they are or where in the nation they are investing.