Insurance for Residential Portfolios

General Landlording & Rental Properties
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Insurance for Residential Portfolios

Matthew Hammond
Member since 2011 · 5 posts · 0 votes

Hey all,
I was just curious what companies and insurance policies people are using for those who have more than 4 SFR or 1-4 unit residential rental properties. Currently I have 8 rentals ranging from single families to 4 unit buildings. My first insurance carrier (USAA) limited my standard fire/liability policy to only 4 properties so I just went out and picked up a Liberty Mutual policy for the remaining 4, but now I'm in the same problem since LM won't insure more than 4 either. They also don't insure LLCs, they insure me with the LLC named as an additional interest on the policy... which is probably fine but who knows.

Anyway I have also been having issues recently with the carriers conducting their own inspections and then randomly determining that repairs are needed (USAA cited that the gutters on one of my properties needed to be replaced so they cancelled the policy pending a licensed contractor to do that), their coverage for the houses seems to vary, and the premiums are really quite high to be honest. I was trying to find one company that would insure 8+ separately deeded properties but I haven't been able to find one from a company that I knew.

Who do you guys use and how much coverage do you get? Any thoughts or ideas?

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Tim Norris
Investor · Kansas City, MO · Member since 2008 · 153 posts · 81 votes
13y

If your LLC owns the property, it should be the named insured, not the additional insured.

As a general rule, carry the amount of coverage that is relative to what you would do with a property in the event of a "large/catastrophic" loss. In other words, if you would not rebuild, carry sufficient coverage to offset the "economic" value (including mortgage, etc...), but avoid claim penalties by either carrying enough coverage to offset co-insurance requirements---or engage with an insurer that offers coverage without. If you would re-build after a loss, carry enough coverage to sufficiently do so. Understand that the term "Replacement Cost" (RC) isn't "reconstruction value". An RC policy simply allows you to recoup the depreciation that is initially levied against a claim settlement, by making the repairs.

There are Programs/coverages that can accommodate what you describe, too: no inspections, all locations (even owned by different entities, in multiple states) aggregated, etc... ; )

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  • Jon Klaus
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    13y

    What state are you in, Matthew?

    I use a broker who can write policies from several companies. Residential, commercial, LLCs, etc.

    0Reply
  • Matthew Hammond
    OP
    Member since 2011 · 5 posts · 0 votes
    13y

    8 of my properties are in Indiana and giving me the most insurance issues given policy differences, etc. I also have 1 4plex rental in CA, 1 SFR in VA, and 1 4plex rental in DC that I didn't mention above. Ideally if I could get them all with one company on one policy it would be best, but the different States will probably prohibit that.

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    13y

    Call local independant agents and ask them if they can find a company to meet your needs. I too have dealt with inspections. They made me spend money and fix a driveway, a new roof for one property, screens on another, etc. They have no problem spending other peoples money and if you dont comply they cancel you!

    0Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    13y

    Ohh, USAA won't cover more than 4? Good for me to know! I use them for everything (love them) but didn't realize the cap. Ha. Glad I read this!

    0Reply
  • Tim Norris
    Investor · Kansas City, MO · Member since 2008 · 153 posts · 81 votes
    13y

    If your LLC owns the property, it should be the named insured, not the additional insured.

    As a general rule, carry the amount of coverage that is relative to what you would do with a property in the event of a "large/catastrophic" loss. In other words, if you would not rebuild, carry sufficient coverage to offset the "economic" value (including mortgage, etc...), but avoid claim penalties by either carrying enough coverage to offset co-insurance requirements---or engage with an insurer that offers coverage without. If you would re-build after a loss, carry enough coverage to sufficiently do so. Understand that the term "Replacement Cost" (RC) isn't "reconstruction value". An RC policy simply allows you to recoup the depreciation that is initially levied against a claim settlement, by making the repairs.

    There are Programs/coverages that can accommodate what you describe, too: no inspections, all locations (even owned by different entities, in multiple states) aggregated, etc... ; )

    1Reply
  • Rob K.
    Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
    13y

    Look into a commercial policy. I have about 35 single family houses on one policy. I have my own name and two LLC's listed on the same policy also. What's really nice is that the houses can be vacant or occupied. You just need to keep them informed of the status.

    There are several companies that offer these. Call an independant broker and see what they offer.

    1Reply
  • David Beard
    Investor · Cincinnati, OH · Member since 2010 · 1k+ posts · 928 votes
    13y

    I agree with Rob K. Around here, American Modern is a good insurance company for cost-effectively blanketing a bunch of rentals (each 6-unit or less) that you have complete or partial ownership in (either LLC or personally owned). You'll need to use a good-sized independent commercial agency that offers a lot of different lines of business (not an agency that just deals with consumer insurance). You want an agency that routes your policy through a wholesale firm in order to maximize buying power with the insurance company (American Modern in my example).

    It seems for me that the sweep spot for coverage is around 50-60% of replacement value, eliminating co-insurance penalties and factoring in depreciation (find an agent who can thoroughly explain how these two things work in your policy, especially in a partial-loss situation, which is overwhelmingly the most likely type of claim you will have).

    1Reply
  • Rob K.
    Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
    13y

    I had American Modern for a few years. They require a minimum of ten properties on the policy. They raised the premiums each year quite a bit.

    I have since switched to SWBC. Their prices are better and they didn't raise them when I renewed for the second year.

    I have also heard that Hastings offers a good policy, but I haven't looked into it.

    0Reply
  • William Brace
    SFR Investor · Watkinsville, GA · Member since 2011 · 83 posts · 33 votes
    13y

    I would also be interested in hearing who some of you guys use for your commercial blanket policies. I'm in the same situation as the OP. Currently with Nationwide and have five SFH with them and I am maxed out. She also writes for American Modern but they were way higher moving one of my properties to them. So I am in the market for a commercial policy that isn't insanely expensive. Yes everyone will be different but it would be nice to hear who some of you are using for multiple properties.

    Don't mean to hijack this thread but seems like my question is on topic with the OP's.

    0Reply
  • Sam W.
    Investor · Northeast, OH · Member since 2012 · 239 posts · 106 votes
    13y

    I'm in the same boat as Matthew Hammond. Maxed out USAA coverage and had to look elsewhere to insure additional properties. For me, USAA recommended Foremost (with whom they have a business relationship). Has worked out well for me and have been happy with Foremost.

    0Reply
  • Tim Norris
    Investor · Kansas City, MO · Member since 2008 · 153 posts · 81 votes
    13y

    We utilized AMIG (American Modern) for awhile, but they started increasing the required coverage to levels that seemed unrealistic relative to the "real" values to repair/rebuild. They also exclude theft coverage on vacants (not that most insurers don't these days). Foremost is a solid insurer, but their rates are usually higher than market in most geographic areas.

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  • Joe Bertolino
    Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes
    13y

    Check with a local independent agent. Regional carriers tend to be better for rental portfolios as the underwriters are fairly local and they have a better grasp on values and coverage options common to your area. In CA, CIG and Mercury are great options. AM's 10+ program is good for older or lower end properties.

    0Reply
  • David Beard
    Investor · Cincinnati, OH · Member since 2010 · 1k+ posts · 928 votes
    13y

    As far as American Modern, yes 10 property minimum. Even though I was already with AM, I obtained a sizable premium reduction when I moved to a new agency that seems to have greater ability/know-how in structuring things and works with/through other agencies on buying power.

    Rob, I'll check out SWBC and Hastings, assuming they insure in Ohio, thanks for the suggestions.

    I've never gotten a real clear explanation on how "depreciation" is applied in an actual claim experience either. Sure, the example of a roof is easy to understand (it's 8 years old out of a 25 year life span), but many other property components are less straight-forward. My agent has indicated that AM is very accommodating to the client in these situations. Hope to not find out anytime soon.

    0Reply
  • Tim Norris
    Investor · Kansas City, MO · Member since 2008 · 153 posts · 81 votes
    13y

    David Beard Though not the most scintillating reading, your policy has a pretty decent explanation. Have the agent point it out. Different items depreciate at different "rates", too. It's tough to calculate it before a claim, because it is levied against that which is damaged.

    0Reply
  • Kenneth LaVoie
    Rental Property Investor · Winslow, ME · Member since 2008 · 826 posts · 281 votes
    13y

    I USE STATE FARM. (local office with long relationship) I'VE FOUND SLIGHTLY CHEAPER but haven't switched because I hear a lot about ins. companies having "intro" rates and excalating soon thereafter. I don't want to turn away from a long (20 plus year) relationship with my local state farm office unless I'm sure I'll get decent service / coverage / lower rates. That being said, SF does differentiat btwen 1-4 and 5+. They do give price breaks when you reach x number of units. I've gotten two breaks so far (unfortunately the units counted are only 5+ so it doesn't help when I buy a 1-4). I insure for the MINIMUM I can get away with without incurring the risk that a partial loss will result in not enough coverage. SF does not have a co ins. penalty (i.e. many companies penalize if you insure for 60% or less of rebuild cost, or something of that nature. My terminology is imprecise here...) also, I have 5k deductibles on everything and thena 2 Million dollar blanket commercial liability (all buildings are insured to 1 Million) so in effect, each building is insured to 3 Million liability wise. Here are my rates
    (Total $17,400 for 12 buildings / 49 units)

    Prem Deduct Repl Cost Insured for # units

    494 5000 126000 126000 sfr
    461 5000 224000 90000 sfr
    643 5000 363000 145000 2
    1873 5000 321000 236000 4
    2093 5000 498000 206000 7
    542 5000 179000 144000 2
    391 5000 115000 92000 sfr
    417 5000 128000 103000 sfr
    1733 5000 430000 191000 4
    3841 5000 545//498 227//202 11 (2 bldgs.)
    2061 5000 491000 215000 8
    2873 5000 731000 350000 7

    1Reply
  • Rob K.
    Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
    13y

    I dumped State Farm when they stopped insuring vacant houses. It got to the point where they wouldn't write a policy on a house I was purchasing unless I could show them a lease. Looking back, their premiums were WAY higher than what I currently pay.

    0Reply
  • Kenneth LaVoie
    Rental Property Investor · Winslow, ME · Member since 2008 · 826 posts · 281 votes
    13y

    State farm doesn't seem to have that limit here in Maine (vacant). Though the agent did tell me to be careful and describe it as "between tenants" or something like that vs. empty (vacant vs. empty maybe?) so maybe they would NOT insure if I was BUYING and empty house. Rob, do the rates I posted above seem high to you?

    0Reply
  • Rob K.
    Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
    13y

    Kenneth LaVoie I don't think the rates sound bad. Check your policy to see what time limit there is when a property is vacant.

    I know that when I had State Farm, my agent wanted the house to look lived in when I purchased it. Later they started requiring weird stuff like a handrail on the front porch when it wasn't even tall enough to justify one. Later they said they couldn't insure a house without a signed lease. That's when I switched.

    0Reply
  • George P.
    Property Manager · Livonia, MI · Member since 2011 · 4k+ posts · 1k+ votes
    13y

    i use encompass insurance that has great rates. the agent is a moron, he can't put a sentence together in an email. he never uses any punctuation for crying out loud...

    but i digress.. i tried to switch and the 4-5 companies i called (not rob's) told me "forget it. i can't compete with Encompass". and the replacement values are insanely high. most of them are worth around 100 and the replacement value is at around 190k-210k. they would not lower them either.

    the bad thing is that they insure up to 4. i have to have Great lakes for the others.

    I have to try someone else because i want all of them under one roof, but can't find anyone else that can match those quotes.

    0Reply
  • Rob K.
    Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
    13y
    Originally posted by George P.:
    i use encompass insurance that has great rates. the agent is a moron, he can't put a sentence together in an email. he never uses any punctuation for crying out loud...

    Does he at least begin each sentence with a capital letter? ;)

    1Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    13y

    Rob K - LOL, you caught George P. there ...

    0Reply
  • George P.
    Property Manager · Livonia, MI · Member since 2011 · 4k+ posts · 1k+ votes
    13y

    lol. yes, he does. the guy has terrible customer skills.

    just look at a sample response from him:

    "Yes you can have a pool must have fence around pool and you are the one they come to if anyone drowns I would not want the liability if I was you"

    reminds me of my realtor who also can't write worth cow dung.

    0Reply
  • Matthew Hammond
    OP
    Member since 2011 · 5 posts · 0 votes
    13y

    Heh, I've been receiving the same type of responses. This is word for word the response I received from one agent:

    "Hi. Matt. Thank you so much for the opportunity. This is a market that is becoming vary difficult. I have carriers not writing dwellings and some that might. With that said I am seeing rising prices. Lots of information will be needed and applications filled out. I would be more than happy to discuss this with you. I am not sure if it’s a good market to be shopping . I have been doing this for 39 years and never seen the property insurance market like it is now.If you Wnt to discuss let me know . Thanks again. Ron."

    Then I talk to him and he tells me I shouldn't change anything because no one will insure portfolios without coinsurance now. I talked to a State Farm agent and they said that regardless if you call the place vacant or "in between renters" it is the same and State Farm provides no coverage for that period. So if your contractor injures himself or someone wanders onto your property and hurts themselves you're screwed because you have no underlying liability coverage required for your umbrella. Too much of a risk in my opinion - great if the policies are low cost but if they don't protect you from a major loss then there is no point in having the insurance, you might as well save the premiums and roll the dice that nothing is going to happen.

    The only option that seemed semi-viable was American Modern but there have been mixed reviews on that so I'm not sure about switching. I think I'll keep USAA / Liberty Mutual combo for now and then revisit this again in a year or two if my portfolio continues to grow.

    0Reply
  • Elizabeth S.
    Real Estate Investor · Fort Wayne, IN · Member since 2013 · 168 posts · 78 votes
    13y

    I'm in Indiana and use Star Financial for my properties. I used to use MetLife but ran into the same 4 property cap.

    0Reply
  • Tim Norris
    Investor · Kansas City, MO · Member since 2008 · 153 posts · 81 votes
    13y

    @Matthew Hammond. There are carriers/Programs that waive co-insurance. Your agent likely just doesn't have access to them.

    0Reply
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