Insurance: what’s your “it saved me” success story?

Question

We’ve all heard the horror stories and know the illogical thinking behind not having property insurance.

However; In reviewing all of our property insurance with my EXCELLENT agent Julie I wondered what is your “It saved me” story with your property insurance?

Bill Exeter · Answer

I just wanted to jump in here to clarify that the transaction above was a 1033 Exchange (Section 1033 of the Internal Revenue Code) and not a 1031 Exchange. The 1033 Exchange applies to involuntary conversions like natural disasters (fires) and to eminent domain cases (condemnation by government agency). 1033 Exchange provide more flexibility than a 1031 Exchange.

Jay Hinrichs · Answer

@Deanna McCormick really depends on how big your portfolio is ..

when I got up to 350 SFR's I was just about to go to liability only and drop fire storm etc.

with 5k deductible I found most things were never covered anyway.. and I have lost exactly 1 home to a fire out of the 500 plus I have owned..

so at a modest 700 a year per policy we were paying 25k a month to insure homes we were all in for 50 to 70k each... I would need one to burn down every 4 months..

Liablity yes

ONE thing I won't go without thought is TITLE insurance.. I have a landlocked claim going right now.

I bought property Chicago Title missed that it was landlocked. If they can't buy me an easement they are going to have to cut me a 450k check.

Jason Bott · Answer

@scott

My client had purchased his largest property to date, a 55 unit storage facility with a SFR on the same plot of land, January 2017. He was able to swing the deal, but it took most of the cash he had on hand.

Last Friday, his tenants, whom occupied the property for the last 12 year, ordered more propane (the heating source for the property). At 8:00 am, the employee of the gas company hooked it up, turned it on, and it blew out the pilot light of the water heater. Employee goes to relight it and there is an explosion. Large enough to knock stuff off of the walls upstairs.

Employee goes to the hospital (he was out in 2 days). 2nd employees comes by at 8:45 and checks everything out with the tenants, and everything looked fine.

9:00 am, 2nd employee leaves, tenants leave for work.

9:15 the house is on fire.

Looks to be about $100,000 worth of damage.

Now, the Gas company will most likely be the one responsible party, ad make the client whole. But this may be 2-3 year if they drag it out. It's been 6 days and the gas company has not responded to our submittal of the claim or even been on site to do their investigation.

In the mean time, my clients property policy is repairing the property and providing loss of rents to cover the debt payment. And chances are, our property policy will close out and seek reimbursement from the Gas company.

Bottom line, if my client would have to wait for 1, 2 or 3 years to have the gas company pay for the damages and lost rents, he would loss the property because he can not float that much $ for that long.

That's the one I have this month:)

Kim Meredith Hampton · Answer

@Scott F. one incident, and there have been many, but one that sticks out in my mind is that we had a tenant in one side of a duplex that took out her hearing aids and was cooking on the stove, walked away and the grease started a fire. The smoke alarms went off, of course she couldn't hear them, neighbor saw the flames, pounding on the door, called 911. By the time the tenant came out of the bathroom, the fire truck s were there. She's was ok, as well as the neighbors, but while kitchen and intonthe livingroom were destroyed, to the tune of $20,000!

At the time we only "recommended" that tenants carry renters policies, but now they "must " provide a copy with us as additionally insured. Thank god we had our policies in place, I wasn't prepared to redo that unit, it had already been redone a few years prior. I always say insurance is expensive until you need it. I also carry an umbrella policy over all my properties, including the one I reside

Peter B. · Answer

@Scott F.

Yes, 1033 is a conversion due to natural disaster. As @Bill Exeter has explained. A few of the differences are the time frame to convert funds is longer, I believe I had 2 years. They don't require an intermediary. I actually placed the funds on my portfolio until I found the right property. Over 8 months I payed down a large amount of extra principle. Worked out well.

Peter B. · Answer

January 2016. I had a total loss house fire, Burnt to the ground. Never found the cause. I owned the home for 15 years. It was paid for and the coverage was for 2x the original purchase price. I 1033 the insurance money into a B 4 plex last august. So the what was a win.

As for the family they lost almost everything but were all ok.. They were very well liked in the community and through a fund raiser were able to purchase their first home. (They had rented/lived there for nearly 20 yrs)

Joe Splitrock · Answer

@Scott F. tenants teenage daughter decided to make friend chicken on the stove top in grease. It boiled over and started on fire. The neighboring tenant came over to help put it out. He poured flour on the fire, which of course just made it flare up faster. He later told me he couldn't remember if it was flour or baking soda that you were supposed to pour on a grease fire. I guess he will remember now. Ever since this experience, a fire extinguisher is always in every kitchen of every rental property.

The fire department came quickly, but the kitchen was destroyed in minutes. Honestly the water from the fire department and smoke did as much damage as the fire itself. I ended up getting a check for the work and when all was said and done I came out a little ahead.

This was very early in my investing career and it is a miracle I convinced my wife to stay in the business after this happened. Basically we decided whenever something bad happens just learn from it. The reason everyone is not a landlord is most people get scared away by such experiences.

I have no problem paying for insurance and I hope I never make a claim again. One pro tip is always select maximum deductible. Insurance is catastrophic situations, not for a sub-$1000 repair. Second pro tip is always get replacement value.

Jim Brozny · Answer

A slow leak developed in a pipe in the ceiling of a unit in a duplex. Water pooled in the ceiling and the drywall began to droop. The tenant allowed her young child to play under the drooping ceiling. The ceiling fell on the little girl. Luckily she was unhurt but very frightened. She went to the emergency room to be sure she receive any head trauma.

The tenant didn't call me until after she came home from the hospital. She said the bubble in the ceiling had been getting larger and larger throughout the day. When I asked her why didn't she call me when she first saw it happening, she said she didn't know.

Insurance paid for the repairs, but they really saved me three months later when the tenant sued me for negligence. I called the insurance company and they took over - assigned an attorney and took charge. The case was in the courts for almost 2 years before the judge finally dismissed it. The insurance company won!

Ultimately, the tenant had no case. A month or two prior to the event, the city had inspected the rental unit and had given a green light for rental. Also, HUD had completed their inspection around the same time and approved it to be rented. I had documentation from two governmental bodies that the property had been inspected and found clear of issues.

Nicole A. · Answer

@Jay Hinrichs I too, once made a claim with my title insurance regarding an easement. It took a bit of pushing and some persistence, but that issue was covered for me as well.

Deanna McCormick · Answer

Insurance " SAVES ME PEACE of MIND" how could you chance to operate without it.

From storms, to accidents I don't know how a rental license could be issued without proof of coverage. Similar to you can't get license for your car without proof of insurance.

Insurance: what’s your “it saved me” success story?

Insurance: what’s your “it saved me” success story?

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