Apartment Insurance Policy vs. Landlord / Standard Rental Policy

5 Replies

I'm trying to better understand what makes up an "Apartment Insurance Policy" and how it might be different than a typical insurance policy.

The context was that an investor has a duplex and decided to go with an "Apartment Insurance Policy" because it offered a higher level of coverage.

Would really appreciate if anyone has insight into 1) what exactly is an "Apartment Insurance Policy and 2) why would an investor decide to use one for a small MF (2 - 4 units).

Thanks!

Tom

@Tom Dupree  the names of policies do not have any relation from one insurance company to another.  No matter the name, when moving from a personal policy, (where you duplex of 4 family is tied to your primary residence) to a commercial policy, you will have the ability to have higher liability limits and additional coverages not available in a personal policy.

Don't worry about the name but focus on the specific coverages that fit your property and risk tolerance.

@Jason Bott  Thanks for the information!  

How often do you see a duplex under a commercial policy?  Is that common?

Would there be any specific things that might push an investor to use a commercial policy on a non-commercial property?  

@Tom Dupree  

The use of the property

Would determine if it I commercial or no commercial.  if the duplex is owner occupied, then it should stay on a personal policy.  If any building is being leased or rented, then it would be considered commercial.  I insure many singles and duplexes on commercial policies, but also have a 4 family on a personal policy because the owner occupies the building.  

Keep in mind most personal lines companies can accommodate a few rental properties.  So there is some overlap on the personal and commercial sides where you could Choose to go either way.

@Tom Dupree  

We've found that even when insurance companies use the same generic term, what is in the policies is different enough that it isn't apples to apples. @Jason Bott  is spot on.

Under Residential

I was able to have my first duplex using a standard policy with a rental rider though state farm. We lived in one side with tenants on the other. Then we bought our second rental property, a single family home, and filled it with tenants and called state farm. She added it as a second residential policy. We have had 2 duplexes and 2 SFRs under residential insurance with specific additional riders to risks for our area.

Umbrella Policy

Umbrella policies are the cheapest vehicle for limiting liability I have yet to find. For $250 a year, we had 1M in coverage across all our properties. Until we bough a fourplex, and state farm said "too much". We were then encouraged to go get a commercial umbrella policy. Bigger dollar coverages (we have a few million), reasonable price, but its a one time deal. If you use the policy, it expires, then you get to re-apply and they decide if the want you. Our umbrella policy was only allowed to cover our home + one additional and I think our agent missed it as we did a it of horse trading.

Commercial Policy

When we tried to insure our first fourplex with state farm, they only offered us a commercial policy, stating that a residential policy was not an option. The price was not much more within context, but there was more coverage out of the box than my residential policies, which required additional riders. 

@Jason Bott  Thanks again for your help in explaining the differences and giving some background information.

@Shane Pearlman  I appreciate you telling me a little about your experiences and what worked for you.  Since this will be our first property so we appear to have some flexibility between personal and commercial.