Is insurance really necessary?
Member since 2025 · 8 posts · 1 vote
Is insurance really necessary?
Most Popular Reply
Stuart UdisPro Member
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votesWow. 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.
23 Replies
- 1moStuart UdisPro MemberAttorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
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.
- Member since 2025 · 8 posts · 1 vote1mo
Quote from @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.
I can't think of the last time that I've seen a fire cause significant damage to a residence. It does happen, but the odds are extremely small. And if I have to rebuild a house, it will hurt, but it won't be the end of the world.
- Rental Property Investor · New Braunfels, TX · Member since 2021 · 288 posts · 255 votes1moI've got 15 mortgages on rental properties. The instant I change insurance companies I start getting proof of coverage emails from the lenders stating if I don't show proof they will get their own insurance for me and bill me for it. Unless you have a paid off property I don't see how you would get away with no insurance and even then I think you are crazy to self insure. Insurance is just a part of the game.
Quote from @Spencer Cox:
Quote from @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.
I can't think of the last time that I've seen a fire cause significant damage to a residence. It does happen, but the odds are extremely small. And if I have to rebuild a house, it will hurt, but it won't be the end of the world.
I feel your pain though, I've had mortgage insurance for for over 40 years on my personal home's and have never filed a claim. - Member since 2025 · 8 posts · 1 vote1mo
Quote from @Spencer Cox:
Quote from @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.
I can't think of the last time that I've seen a fire cause significant damage to a residence. It does happen, but the odds are extremely small. And if I have to rebuild a house, it will hurt, but it won't be the end of the world.
Exactly. And if I have to pay to build a new house, then I have a new house. Yes, I have one mortgage plus a half of a mortgage, but that's the cost of doing business. And not to disrespectful to anyone or sound like a jerk, but adding 50% (for example) to a mortgage on a property is not going to dramatically change my life.
- Specialist · Strongsville, OH · Member since 2016 · 303 posts · 217 votes1mo
All of your lenders are checking on your insurance you just don't know about it. It's the wacky small lenders who are the ones who follow up and ask for proof of insurance even though your insurance company sends them a confirmation of coverage at every policy renewal.
If you can self insure go for it!
- Member since 2025 · 8 posts · 1 vote1mo
Quote from @Michael Norris:
All of your lenders are checking on your insurance you just don't know about it. It's the wacky small lenders who are the ones who follow up and ask for proof of insurance even though your insurance company sends them a confirmation of coverage at every policy renewal.
If you can self insure go for it!
Is there some kind of clearinghouse where the financing company can check to see if I have insurance? If so, do you know what it is called? On properties where I do not have an escrow account, I have changed insurance companies, so I don't know how the financing company would know who I changed to unless there's some kind of central depository of information.
To your comment, "if you can self-insure, go for it". That's the problem. I feel like I am self-insuring because I have to pay for all repairs myself. The only problem is the liability. I have umbrella insurance that would cover it, but the deductible is about half of the value of an average house so I'm already bearing a significant portion of the risk. So I'm self-insuring, but it's costing me one month's rent per year for basically nothing.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes1mo
@Spencer Cox The moment you get financing you have to show proof of insurance - if that insurance is changed or cancelled the insurance provider must notify the lender who is also listed as an additional insured on the policy. I am a lender and we get notifications all the time if a policy was canceled or extended.
The moment it's not forced placed insurance is put on the property and you will be charged 3x your regular insurance for forced placedIf you don't want to carry insurance then pay cash - otherwise no lender will lend without insurance on a property
7e investments53 Reviews - 1moOwen RosenBusiness MemberProfessional · Clinton Township, MI · Member since 2015 · 676 posts · 259 votes
Quote from @Spencer Cox:
Quote from @Michael Norris:
All of your lenders are checking on your insurance you just don't know about it. It's the wacky small lenders who are the ones who follow up and ask for proof of insurance even though your insurance company sends them a confirmation of coverage at every policy renewal.
If you can self insure go for it!
Is there some kind of clearinghouse where the financing company can check to see if I have insurance? If so, do you know what it is called? On properties where I do not have an escrow account, I have changed insurance companies, so I don't know how the financing company would know who I changed to unless there's some kind of central depository of information.
To your comment, "if you can self-insure, go for it". That's the problem. I feel like I am self-insuring because I have to pay for all repairs myself. The only problem is the liability. I have umbrella insurance that would cover it, but the deductible is about half of the value of an average house so I'm already bearing a significant portion of the risk. So I'm self-insuring, but it's costing me one month's rent per year for basically nothing.
Is there a clearinghouse? No. Does your lender ask to be listed as the mortgagee on the policies? If so, they get notice of everything. If not, that's odd, but you are only bound by your contract with them at that point. Your contract likely requires you to carry certain insurance.
How many properties are we talking about here? That might inform the deductible on the umbrella situation but sounds odd as well.
Why do you think you can't file claims? Is it a good idea to file small claims? No, but feel like you can 't file any? That's odd.
There are so many different permutations and things you can potentially do. You just have to talk to a professional and not rely on piecemeal guesswork answers from an internet forum.
Royal Oath Insurance Group4.9204 Reviews - Specialist · Strongsville, OH · Member since 2016 · 303 posts · 217 votes1mo
Quote from @Spencer Cox:
Quote from @Michael Norris:
All of your lenders are checking on your insurance you just don't know about it. It's the wacky small lenders who are the ones who follow up and ask for proof of insurance even though your insurance company sends them a confirmation of coverage at every policy renewal.
If you can self insure go for it!
Is there some kind of clearinghouse where the financing company can check to see if I have insurance? If so, do you know what it is called? On properties where I do not have an escrow account, I have changed insurance companies, so I don't know how the financing company would know who I changed to unless there's some kind of central depository of information.
To your comment, "if you can self-insure, go for it". That's the problem. I feel like I am self-insuring because I have to pay for all repairs myself. The only problem is the liability. I have umbrella insurance that would cover it, but the deductible is about half of the value of an average house so I'm already bearing a significant portion of the risk. So I'm self-insuring, but it's costing me one month's rent per year for basically nothing.
Yes there is at least 1 clearing house called Lexus Nexis. If your agent binds the new policy with a lienholder or other named additional insureds the insurance company and or Lexus Nexis sends a little post card or letter telling the lender that info.
Likewise when you cancel a policy with a named lienholder or other additional insureds Lexus Nexis sends out a little postcard thing telling them the policy cancelled.
There may be a digital version lenders can subscribe to for real time info but that is above my pay grade.
- 1moOwen RosenBusiness MemberProfessional · Clinton Township, MI · Member since 2015 · 676 posts · 259 votes
Quote from @Michael Norris:
Quote from @Spencer Cox:
Quote from @Michael Norris:
All of your lenders are checking on your insurance you just don't know about it. It's the wacky small lenders who are the ones who follow up and ask for proof of insurance even though your insurance company sends them a confirmation of coverage at every policy renewal.
If you can self insure go for it!
Is there some kind of clearinghouse where the financing company can check to see if I have insurance? If so, do you know what it is called? On properties where I do not have an escrow account, I have changed insurance companies, so I don't know how the financing company would know who I changed to unless there's some kind of central depository of information.
To your comment, "if you can self-insure, go for it". That's the problem. I feel like I am self-insuring because I have to pay for all repairs myself. The only problem is the liability. I have umbrella insurance that would cover it, but the deductible is about half of the value of an average house so I'm already bearing a significant portion of the risk. So I'm self-insuring, but it's costing me one month's rent per year for basically nothing.
Yes there is at least 1 clearing house called Lexus Nexis. If your agent binds the new policy with a lienholder or other named additional insureds the insurance company and or Lexus Nexis sends a little post card or letter telling the lender that info.
Likewise when you cancel a policy with a named lienholder or other additional insureds Lexus Nexis sends out a little postcard thing telling them the policy cancelled.
There may be a digital version lenders can subscribe to for real time info but that is above my pay grade.
This is not how lenders use Lexis Nexis. Home insurance does not report in this way to Lexis Nexis.
Lenders get notice directly from the insurance company because you're required to list them as an additional interest as part of the loan.
If you don't do this, they will put their own insurance on the property and charge the borrower.
If they're listed and a policy cancels, they get notice the same as the borrower/policyholder does.
Royal Oath Insurance Group4.9204 Reviews - Specialist · Strongsville, OH · Member since 2016 · 303 posts · 217 votes1moI don't want to be like this but yes... Lexus Nexis does in fact do reporting for insurance companies to lenders
Quote from @Owen Rosen:
Quote from @Michael Norris:
Quote from @Spencer Cox:
Quote from @Michael Norris:
All of your lenders are checking on your insurance you just don't know about it. It's the wacky small lenders who are the ones who follow up and ask for proof of insurance even though your insurance company sends them a confirmation of coverage at every policy renewal.
If you can self insure go for it!
Is there some kind of clearinghouse where the financing company can check to see if I have insurance? If so, do you know what it is called? On properties where I do not have an escrow account, I have changed insurance companies, so I don't know how the financing company would know who I changed to unless there's some kind of central depository of information.
To your comment, "if you can self-insure, go for it". That's the problem. I feel like I am self-insuring because I have to pay for all repairs myself. The only problem is the liability. I have umbrella insurance that would cover it, but the deductible is about half of the value of an average house so I'm already bearing a significant portion of the risk. So I'm self-insuring, but it's costing me one month's rent per year for basically nothing.
Yes there is at least 1 clearing house called Lexus Nexis. If your agent binds the new policy with a lienholder or other named additional insureds the insurance company and or Lexus Nexis sends a little post card or letter telling the lender that info.
Likewise when you cancel a policy with a named lienholder or other additional insureds Lexus Nexis sends out a little postcard thing telling them the policy cancelled.
There may be a digital version lenders can subscribe to for real time info but that is above my pay grade.
This is not how lenders use Lexis Nexis. Home insurance does not report in this way to Lexis Nexis.
Lenders get notice directly from the insurance company because you're required to list them as an additional interest as part of the loan.
If you don't do this, they will put their own insurance on the property and charge the borrower.
If they're listed and a policy cancels, they get notice the same as the borrower/policyholder does.
- 1moOwen RosenBusiness MemberProfessional · Clinton Township, MI · Member since 2015 · 676 posts · 259 votes
Quote from @Michael Norris:
I don't want to be like this but yes... Lexus Nexis does in fact do reporting for insurance companies to lendersQuote from @Owen Rosen:
Quote from @Michael Norris:
Quote from @Spencer Cox:
Quote from @Michael Norris:
All of your lenders are checking on your insurance you just don't know about it. It's the wacky small lenders who are the ones who follow up and ask for proof of insurance even though your insurance company sends them a confirmation of coverage at every policy renewal.
If you can self insure go for it!
Is there some kind of clearinghouse where the financing company can check to see if I have insurance? If so, do you know what it is called? On properties where I do not have an escrow account, I have changed insurance companies, so I don't know how the financing company would know who I changed to unless there's some kind of central depository of information.
To your comment, "if you can self-insure, go for it". That's the problem. I feel like I am self-insuring because I have to pay for all repairs myself. The only problem is the liability. I have umbrella insurance that would cover it, but the deductible is about half of the value of an average house so I'm already bearing a significant portion of the risk. So I'm self-insuring, but it's costing me one month's rent per year for basically nothing.
Yes there is at least 1 clearing house called Lexus Nexis. If your agent binds the new policy with a lienholder or other named additional insureds the insurance company and or Lexus Nexis sends a little post card or letter telling the lender that info.
Likewise when you cancel a policy with a named lienholder or other additional insureds Lexus Nexis sends out a little postcard thing telling them the policy cancelled.
There may be a digital version lenders can subscribe to for real time info but that is above my pay grade.
This is not how lenders use Lexis Nexis. Home insurance does not report in this way to Lexis Nexis.
Lenders get notice directly from the insurance company because you're required to list them as an additional interest as part of the loan.
If you don't do this, they will put their own insurance on the property and charge the borrower.
If they're listed and a policy cancels, they get notice the same as the borrower/policyholder does.
I'm aware Lexis Nexis has lots of data and lots of products.
Most insurance carriers do not use this product (which is supposed to reduce the amount of mailing/cost on their end) and most lenders also don't use this as a primary way of tracking insurance/loan compliance. There is subtlety to what information can be obtained by what entities.
Could that change in the future? Sure, but that requires many lenders and insurance companies to pay Lexis Nexis even more money so they may or may not.
In addition, the borrower still must list the mortgage holder properly on the policy otherwise the mere existence of an insurance policy doesn't necessarily protect the lender's interest.
Royal Oath Insurance Group4.9204 Reviews
- Investor · NY · Member since 2026 · 121 posts · 42 votes1mo
Are you saying that your monthly assurance bill is the same as your rent??? if yes, I would suggest you to find a new insurance broker ASAP
- 1moOwen RosenBusiness MemberProfessional · Clinton Township, MI · Member since 2015 · 676 posts · 259 votes
Quote from @Mendy J.:
Are you saying that your monthly assurance bill is the same as your rent??? if yes, I would suggest you to find a new insurance broker ASAP
He's saying that insurance is one month of rent so perhaps $1000/year on a property pulling in $12000 in rent
Royal Oath Insurance Group4.9204 Reviews
- Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes1mo
Hey, if your pockets are deep enough, it's no big deal. Don't plan on getting a loan after a major incident, unless you have the cash account balances to secure the loan.
Generally, for just one or two, maybe three properties, in addition to "reasonable" liability limits that vary by locale and property, it is customary to also have an umbrella policy. These two policies provide a likely minimum coverage of 7 - 10 Million dollars...just for injury, for ONE occurrence, of your tenants, their guests, or John Q Public walking onto your property. Add to those amounts, the replacement cost for the structure, based on current building codes. The "codes" part also will usually apply to partial losses, where you end up being required to update the whole structure's electrical or other systems.
Obviously you are unconcerned with "lost rents" during a constructive eviction, so no need to add any details.
One other potentially critical aspect is whether the property is part of an HOA/COA property, or a multi-unit apartment building. In those cases, you will often have much greater exposure due to effects on other tenants, or owners or of "common interest" elements of a property. Those are a PITA when you ARE well covered and your insurance meshes properly with the master policy.
I thing @Stuart Udis said it best:
If you're genuinely questioning whether to carry insurance at all, I can only imagine what other operational shortcuts you're taking. - 1moStuart UdisPro MemberAttorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
I now have a better sense of what's going on here. @Spencer Cox What would you say is the value of the property? Judging by your recent statement the deductible on your umbrella policy is 50% of the real estate's value I am guessing this is D/F real estate in middle of nowhere USA. Replacement cost influence on insurance premiums are ROI killers in this type of real estate. I would venture to say just about every other opex and capex line item that surfaces decimates the real estate as well. These inexpensive properties usually become expensive issues because owners neglect ordinary opex and cap ex leading to issues that cost more to resolve than the actual real estate is worth.
- Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes1mo
Thats fine if you have money sitting around to rebuild an entire home that was hit with a disaster or possibly get sued for a couple million dollars.
- Saint Paul, MN · Member since 2015 · 49 posts · 33 votes1mo
One thing that caught my attention is that you mentioned having an umbrella policy but potentially not carrying an underlying property liability policy.
Is the umbrella actually sitting over another liability policy that meets its underlying coverage requirements? My understanding has always been that umbrella policies are designed to provide excess liability coverage, not replace the primary policy they're intended to sit over.
That might be worth reviewing with your agent before making any decisions.
- Member since 2026 · 72 posts · 30 votes1moProbably not a wise area to cut. However, if you want to make your premium more manageable, you can raise your deductible to 10k - 25k. In certain states and policies, once a claim is over 25k, the deductible is waived. At least it was in New York with Chubb and me a few years ago.
Quote from @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???
- 1moDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Quote from @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???
Your lender will find out INSTANTLY if you cancel your insurance you will force-place a policy that will cost you triple.
Can't believe this is a serious post!
Logical Property Management4.9450 Reviews - Real Estate Broker · New York, NY · Member since 2020 · 2k+ posts · 1k+ votes1mo
Hey Spencer,
Yes, absolutely. I think insurance is one of those expenses that’s easy to question when everything is going well, but it’s there to protect you from the one event that could seriously hurt the portfolio.
I understand the self-insurance argument for smaller repairs and routine issues, especially if you have strong reserves. But a major fire, serious water damage, or liability claim can be a completely different level of exposure. One bad event could wipe out years of cash flow and equity.
I’d look at the deductible and shop around for the best coverage rather than going without it. Even if your lender isn’t asking for proof, you’re still the one taking on that risk. Definitely not an expense I’d cut from the budget.If you have any more questions about it, feel free to reach out - my DMs are always open!
- Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes1mo
@Spencer Cox As others have correctly stated, as soon as you cancel insurance, the lender will be notified and force place insurance for 3 times the price.
It's not so much fire, IMO, it's water damage that's so costly. I had a dishwasher hose break on the 2nd floor once, even though it was shut off in 10 min, it flooded the two downstairs apartments and did $25,000 in damage. Plus the loss of rental income. For $1200 per year, yes, I was very happy to have insurance.
- Member since 2025 · 8 posts · 1 vote1mo
Quote from @Tom S.:
@Spencer Cox As others have correctly stated, as soon as you cancel insurance, the lender will be notified and force place insurance for 3 times the price.
It's not so much fire, IMO, it's water damage that's so costly. I had a dishwasher hose break on the 2nd floor once, even though it was shut off in 10 min, it flooded the two downstairs apartments and did $25,000 in damage. Plus the loss of rental income. For $1200 per year, yes, I was very happy to have insurance.
Thanks. Yes, water damage is really the only thing that worries me. Thanks for your thoughts.
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