Risks Of Minimal Insurance On A Large portfolio
Investor · Dayton, OH · Member since 2017 · 2 posts · 6 votes
Risks Of Minimal Insurance On A Large portfolio
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Investor · Houston, TX · Member since 2019 · 95 posts · 29 votes
6moZachary — with 100+ properties and 15 years of no claims, you've clearly got a well-managed portfolio. The fact that you're thinking about this strategically instead of just blindly paying premiums puts you ahead of most investors.
A few thoughts from someone who works with large-portfolio investors on the insurance side:
The $25K deductible move was smart — at your scale, you're essentially self-insuring smaller claims anyway. The premium savings over 100+ properties adds up fast.
On building ordinance and law coverage: I'd be careful dropping this, especially on older properties. If you have a major loss and the city requires you to bring the rebuild up to current code, that cost can be 20-30% above the dwelling replacement value. On a $200K property that's $40-60K out of pocket that wouldn't have been covered. One incident could wipe out years of premium savings.
On ACV vs replacement cost: ACV on a 15+ year portfolio means heavy depreciation on roofs, HVAC, plumbing — exactly the things that get damaged in claims. Tony's suggestion about agreed value is solid if your carrier offers it. Best of both worlds.
Here's what I'd suggest thinking about: instead of cutting coverage to build cash reserves, consider building reserves in a vehicle that also serves as a protection layer. I've seen large-portfolio investors park capital in properly structured whole life policies — the cash value grows tax-deferred, is accessible via policy loans in days (no bank approval needed), and the death benefit adds another protection layer for your family and business partners.
The math can work well at scale: the premium savings you're chasing by reducing coverage might be better achieved by restructuring how you hold your reserve capital, while keeping your coverage intact. One bad claim on a property with reduced coverage could cost more than years of premiums saved.
Just something to model out. At your portfolio size, the risk-reward of cutting coverage gets asymmetric fast.
12 Replies
- Insurance Agent · Member since 2020 · 177 posts · 76 votes7mo
Something that might be worth considering, if your carrier allows it, would be "agreed value." Some carriers I write business with offer this as a RC option but at a lower coverage amount.
Example: $400,000 at 100% RC at $1,800/year premium
With Agreed Value: $200,000 coverage and all claims paid out at RC, not to exceed 200K. Roughly $1,100/year (estimate of course)
This can save you hundreds of dollars per policy depending on the coverage selection. Most carriers do not offer coverage like this, but carriers like Auto-Owners does. Great way to save money while also keeping RC coverage on the dwelling and roof. Dwelling coverage has to be under 80% of RC value to get this type of coverage as well.
- Insurance Agent · Orlando, FL · Member since 2015 · 297 posts · 122 votes7mo
It all depends on your risk tolerance and what your bank will allow. Ordinance/law coverage is an interesting one that can be a difference-maker in certain claims but I can also see how it would move the needle on premium reduction.
I'm curious - what is driving the desire to reduce premiums? At your scale, would $10k cash flow be worth the additional risk. What will you do with the additional savings? I would feel more comfortable tolerating the risk if it was used to build reserves instead of spent on lifestyle upgrades.- Investor · Dayton, OH · Member since 2017 · 2 posts · 6 votes7mo
Quote from @Jared Townsend:
It all depends on your risk tolerance and what your bank will allow. Ordinance/law coverage is an interesting one that can be a difference-maker in certain claims but I can also see how it would move the needle on premium reduction.
I'm curious - what is driving the desire to reduce premiums? At your scale, would $10k cash flow be worth the additional risk. What will you do with the additional savings? I would feel more comfortable tolerating the risk if it was used to build reserves instead of spent on lifestyle upgrades.Interest rates are going up and my cashflow is going down. The savings would be for building cash reserves. I've been building this portfolio for 15 years and have NEVER HAD AN INSURANCE CLAIM! I know it will happen eventually but that is a lot of money in premiums over the years.
- Specialist · Baltimore, MD · Member since 2017 · 418 posts · 126 votes7mo
Quote from @Zachary Ruschau:
I own over 100 rental properties financed across many loans. My bank only requires I have insurance for these properties without stipulation as to the level of coverage. I have 80% co-insurance with replacement cost value. I recently increased my deductible to $25,000 to lower the premiums. I am considering eliminating the "building ordinance and law" coverage which would save a substantial amount on my premiums. I am also considering switching coverage to actual cash value. I know everyone's financial situation is different but I am curious if anyone has an opinion on the financial risk of not only the high deductible but switching to actual cash value and on excluding the "building ordinance and law" coverage.
The higher deductible makes sense. The Ordinance & Law is really important if they are older properties. ACV is not great because depreciation really lowers claim payouts - an agreed value makes more sense as was mentioned by @Tony
- Investor · Houston, TX · Member since 2019 · 95 posts · 29 votes6mo
Zachary — with 100+ properties and 15 years of no claims, you've clearly got a well-managed portfolio. The fact that you're thinking about this strategically instead of just blindly paying premiums puts you ahead of most investors.
A few thoughts from someone who works with large-portfolio investors on the insurance side:
The $25K deductible move was smart — at your scale, you're essentially self-insuring smaller claims anyway. The premium savings over 100+ properties adds up fast.
On building ordinance and law coverage: I'd be careful dropping this, especially on older properties. If you have a major loss and the city requires you to bring the rebuild up to current code, that cost can be 20-30% above the dwelling replacement value. On a $200K property that's $40-60K out of pocket that wouldn't have been covered. One incident could wipe out years of premium savings.
On ACV vs replacement cost: ACV on a 15+ year portfolio means heavy depreciation on roofs, HVAC, plumbing — exactly the things that get damaged in claims. Tony's suggestion about agreed value is solid if your carrier offers it. Best of both worlds.
Here's what I'd suggest thinking about: instead of cutting coverage to build cash reserves, consider building reserves in a vehicle that also serves as a protection layer. I've seen large-portfolio investors park capital in properly structured whole life policies — the cash value grows tax-deferred, is accessible via policy loans in days (no bank approval needed), and the death benefit adds another protection layer for your family and business partners.
The math can work well at scale: the premium savings you're chasing by reducing coverage might be better achieved by restructuring how you hold your reserve capital, while keeping your coverage intact. One bad claim on a property with reduced coverage could cost more than years of premiums saved.
Just something to model out. At your portfolio size, the risk-reward of cutting coverage gets asymmetric fast.
- 6moMichael K GallagherBusiness MemberReal Estate Agent · Columbus OH · Member since 2018 · 1k+ posts · 1k+ votes
@Zachary Ruschau Is this portfolio in Dayton? The biggest risk I'd see, and obviously I don't know the specifics of your properties or operations, but what we find in that market on the rehab side of things is the cost to do any work, or make substantial repairs very quickly can start to outrun the actual value of the property, so I'd like there would be a risk there to altering the policy specifically coming to mind is with vandalism while vacant at turns or something of that nature. Again if you've got 100 of these in the market you already likely know this but that's where my mind went.
- 6moAlfath AhmedBusiness MemberReal Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
Quote from @Zachary Ruschau:
I own over 100 rental properties financed across many loans. My bank only requires I have insurance for these properties without stipulation as to the level of coverage. I have 80% co-insurance with replacement cost value. I recently increased my deductible to $25,000 to lower the premiums. I am considering eliminating the "building ordinance and law" coverage which would save a substantial amount on my premiums. I am also considering switching coverage to actual cash value. I know everyone's financial situation is different but I am curious if anyone has an opinion on the financial risk of not only the high deductible but switching to actual cash value and on excluding the "building ordinance and law" coverage.
Unless there is a fire or property is hit by a tornado I am not calling insurance. I've got 28 units in Columbus and student housing in Dayton. I have individualized policies with $5k deductible on each one. I get pretty competitive pricing and for now just keeping it that way.
You can look into getting seperate sewer line insurance which another buddy of mine does. I would make moves based on your risk toleranc and ofcourse you know this but have atleast 6-figures in your PM account for rainy days that you can't call insurance for.
ReafCo | Ahmed Group 530 Reviews - Investor · Statewide, MO · Member since 2011 · 814 posts · 425 votes6mo
I like the approach. Insurance companies always want to sell as much insurance as they can. It's all a calculated risk. Premiums have been skyrocketing even for people like you and me with no or few claims. I want to puke when I think about what I have paid and the benefit/value I have received.
Can you tell me who wrote a 25k deductible policy for you?
- 6moOwen RosenBusiness MemberProfessional · Clinton Township, MI · Member since 2015 · 678 posts · 259 votes
Quote from @Zachary Ruschau:
I own over 100 rental properties financed across many loans. My bank only requires I have insurance for these properties without stipulation as to the level of coverage. I have 80% co-insurance with replacement cost value. I recently increased my deductible to $25,000 to lower the premiums. I am considering eliminating the "building ordinance and law" coverage which would save a substantial amount on my premiums. I am also considering switching coverage to actual cash value. I know everyone's financial situation is different but I am curious if anyone has an opinion on the financial risk of not only the high deductible but switching to actual cash value and on excluding the "building ordinance and law" coverage.
If your properties are insured at their replacement cost, you don't have co-insurance. If your properties are insured for less than 80% of their replacement cost, you face a co-insurance penalty. (Based on your description.)
Co-insurance on property insurance is not like co-insurance on health insurance.
Also, ordinance and law is a key coverage to have if you have replacement cost coverage to begin with.
These questions really come down to the investor, risk tolerance, portfolio, cash position, ability to have repairs completed, AND actually understanding your policy before you'd have to use it. Your policy and options available of course.
Royal Oath Insurance Group4.9203 Reviews - 6moJimmy LieuBusiness MemberReal Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votesWelcome to BP, Zachary! With a portfolio that large, insurance decisions definitely become more than just a checkbox—they can have big financial implications. Raising your deductible can make sense to lower premiums if you have strong reserves to cover it, but switching from replacement cost to actual cash value changes how claims are paid, often leaving you with significant out-of-pocket costs after depreciation, especially on older properties. Dropping “building ordinance and law” coverage can be risky too, because if a property is damaged and current codes require upgrades or rebuilding differently, you could be on the hook for those costs. The combination of a high deductible, actual cash value, and no ordinance coverage could save money short-term but potentially expose you to major unexpected expenses in a serious loss scenario, so it’s usually wise to run worst-case numbers and make sure your cash reserves can cover it.
Quote from @Zachary Ruschau:
I own over 100 rental properties financed across many loans. My bank only requires I have insurance for these properties without stipulation as to the level of coverage. I have 80% co-insurance with replacement cost value. I recently increased my deductible to $25,000 to lower the premiums. I am considering eliminating the "building ordinance and law" coverage which would save a substantial amount on my premiums. I am also considering switching coverage to actual cash value. I know everyone's financial situation is different but I am curious if anyone has an opinion on the financial risk of not only the high deductible but switching to actual cash value and on excluding the "building ordinance and law" coverage.
Jimmy Lieu, Red 1 Realty4.9120 Reviews - Insurance Agent · Chicago IL & Palm Beach, FL · Member since 2026 · 16 posts · 3 votes4mo
@Zachary Ruschau there are some group captive programs out there that let you pick and choose if you want certain properties to have ACV or replacement cost insured. Have to do a little digging, but there are resources that can help you find a good fit if that is something you'd be interested in!
- Insurance Agent · Orlando, FL · Member since 2015 · 297 posts · 122 votes4mo
Many people assume ordinance/law coverage is only needed on older properties but it still provides valuable coverage on newer homes.
For example if a brand new home in FL has 30% of the roof damaged, insurance is contractually bound to pay to repair/replace 30% of the roof. However FL Building Code Section 706.1.1 states that any roof damaged 25% or more must be fully replaced. So insurance will pay for 30% of the roof and you'll pay for 70%, unless you have ordinance/law coverage.
Ultimately its your choice on how to proceed. Its a risk to go underinsured but its also a risk to spend huge amounts insuring that large number of properties. I would also double check with the bank - having worked with portfolio lenders it sounds unusual that they wouldn't have strict coverage requirements.
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