Trouble getting insurance due to past claims - will an LLC help?

Question

I own rental properties in one city and two of them had insurance claims in the last 2 years due to hail and tree damage. I just purchased a rental in another state/city and am getting turned down for insurance due to those claims. The homes are owned in my name. An agent mentioned to me that I might have better luck if I formed an LLC on the new one because the claims in my name won't come up. Another agent mentioned that they may still look up the members of the LLC. Has anyone had experience with this issue and know a way to get a good insurance policy that doesn't cost an arm and a leg?

(Please no comments about whether or not my properties should be owned in LLCs, as that is not what this particular post is about.) Thanks!

Michael Norris · Answer

We are very much in hard insurance market with most carriers having a no loss rule going back 3 to 5 years depending on the carrier. If you have any claims or some list particular claims in that time frame they will not accept new business from you.

In speaking with the product managers I've given the example of a client with 50+ locations paying over 45k per year in premium having a claim for $10,000 and would they take the total account into consideration when this client buys another property... the answer was a hard no.

That is how tight the market has become in the last 24 months. Many carriers have ceased offering new policies or will only accept properties in very nice condition with verifiable updates to the roof, electric, hvac, and plumbing. Some carriers have up and pulled out of certain states. The ones that are in the headlines for this are Cali and Florida but it's happening everywhere. Berkshire Guard was the most competitive for 5+ unit properties in my state (Ohio) until they weren't and now just sent out letters to all their clients saying they are no longer offering coverage here at all - 100% non-renewal of the book of business.

It's wild

Abigail Lipson · Answer

I have since asked insurance agents if they look up members of an LLC and, while they don't do that, they do require an individual's name. Just the LLC name won't do. So it doesn't appear the LLC will solve the problem.

Abigail Lipson · Answer

Thanks for your input. I had contacted at least 6 different insurance agents so it wasn't the same insurance carrier, and one of them was a broker shopping it around. <sigh>

Were your insurance claims within the last couple of years? I think insurance companies have become more risk averse as weather events increase. I know hail used to be considered a secondary peril event but has now become primary.

Good info about the LLCs. Sounds like maybe getting a PO Box is the way to go so that the address isn't my own?

Greg Scott · Answer

Hmm. I've had many single family insurance claims and never had this issue.

Was the agent you are using quoting the same insurance carrier?  I would first try a different insurance broker and tell them in advance the issue.

Regarding the LLC, the one insurance broker did not know what he is talking about.  There is no way I know of to "look up" the members of the LLC unless that state has some unusual reporting requirements.  They might look at the LLC mailing address to associate it with a person, but you could always use a Registered Agent and the address would be different.

Trouble getting insurance due to past claims - will an LLC help?

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