Is insurance really necessary?

[Spencer Cox]

I'm having trouble seeing the value of insurance. Am I the only one? Insurance is a little less than one month's rent in my area. If I make a claim again my insurance, my insurance will go way up. I have very rarely had a mortgage company ask for proof of insurance and with DSCR loans, the financing companies aren't looking at my other rental properties like they used to. It seems better to keep the money to self-insure. Any thoughts???

[Stuart Udis]

Wow. What happens when you experience a fire that causes major damage to your building, or worse, a total loss? Your lender still expects to be repaid. Are you writing that check yourself?

Or what if a tenant or guest is seriously injured in a legitimate premises liability claim, even though you exercised reasonable care? Is self-insuring that claim too?

You also don't have to file every small claim. Most experienced owners do a cost benefit analysis before deciding whether it's worth involving their insurance. Higher deductibles and paying smaller losses out of pocket are common strategies to keep loss run records clean while attracting the most comprehensive and cost-effective coverage. 

If you're genuinely questioning whether to carry insurance at all, I can only imagine what other operational shortcuts you're taking. That's not a risk I'd ever recommend in the real estate business.