All Forum Posts by: Bo Bond

@Peter Morgan

If you have a portfolio of rental properties (say 5 or more), then it may benefit you to shop your coverage.  If you have less than a hand full of properties and you plan to sell this specific one in the coming months, I'd just suggest you hang tight.  The increase in premium is $42 per month ($500 / 12 months).  I bet you could take care of that over the next 3 months as you look to sell the property.  Any unearned premiums will be sent back to you once this property is sold.

Just be aware that some carriers have minimum earned premiums you have to wait out if you renewed your insurance within the past 3 months.  If not, then you should be in the clear to cancel without penalty.  You'd just want to confirm this in writing with your agent/carrier before you cancel anything.

If you're insured with a direct writer (St. Farm, Allstate, Nationwide, Farmers, etc.), most of these carriers bill month-to-month and "usually" don't have minimum earned premiums. If this is the case with your carrier, then you can shop and cancel at anytime without penalty.  Again, confirm in writing before making any moves just to be safe.  Good luck!

@Michael Noto LOL!  

@Viral Mehta

While every carrier / underwriter is different from the next, this doesn't make much sense to me and I'm in the North Plano area working with investors all the time.  When you said older build, I thought prior to 1980 or something (not 2000 or 2002).  By all typical standards, there shouldn't be much difference between 2013 and 2000 (even with an older roof).  Building standards and materials have drastically improved, especially since the late 90's. It appears that the carrier doesn't want to mess with rental investment properties unless you're willing to pay a lot more money to insure them.  They're not even giving you $1M/$2M in liability protection per dwelling either!  In my experience, you're premiums should be down around $1,100 - $1,300 per dwelling (property & liability) based off the rates we see consistently in this area right now and the replacement cost values you've listed ($250k range). 

When it comes to property insurance, the major rating factor is replacement cost (insurable value) of the dwelling.  That's the starting point for investor property premiums.  The carrier takes their rate and multiplies it by the insurable value of the dwelling.  The next item to add premium would likely be loss of rents coverage.  These should be the two major factors driving your premiums.

These homes are too new to have any polybutylene plumbing, knob and tube wiring, stab-lok breaker panels, or aluminum wiring issues (which are major issues for most carriers).  The only major exposure in this area is wind/hail storms.  If the dwellings have had any significant losses over the past 3 years, then I could see this being the only other item that could drastically increase premiums.

Hope this helps!  Feel free to reach out with any other questions or concerns.

@Peter Morgan

Can't hurt to ask/try, but not sure how far you'll get.  If you have a solid story (description of the story / exposures they're worried about), then the carrier/agent might be able to get the carrier to reconsider.  It also may be time to look elsewhere for help or alternative options. Sorry for the issues.  

Benjamin,

I really can't speak to what might be typical / normal prudent behavior of a landlord when it comes to keeping your trees pruned and in good shape because I'm not a landlord.  However, as an insurance agent that's dealt with this issue from a risk management point of view, as well as claims point of view, I would suggest these items below as being prudent, and what my clients tend to do to protect themselves in similar circumstances.  

#1.  A general eyeball test is prudent and expected for sure.  It shouldn't be hard to tell if the tree is overgrown, has visible dead limbs, regularly drops sizable limbs/branches on the ground, etc.  If you notice this, it's probably time to act.  When/if you do act, be sure to update the tenant in writing (email, formal letter, etc.).  Multiple points of contact is best.  

#2.  If the tenant (or anyone) emails you or calls you about trees and potential issues or hazards on your property, be proactive.  Don't just sit and do nothing for days, weeks, or months.  If you do, now you've opened the door for negligence.  However, that does "not" mean you have to spend money or physically do something just because someone calls you.  What you "should do" is respond in writing stating what you did (even if it was just the eyeball test).  Again, multiple points of contact is best.

#3. When necessary, use your preferred vendor to trim the trees.  I know some landlords that do this annually, while others do it every other year or so.  I suppose this just depends on many factors (how fast your trees grow, how old they are, are you in a high wind prone area, etc.).  Respond in writing with updates / actions.

#4.  Lastly, if there's real concern about issues or potential hazards, call an arborist.  They have their own professional liability.  If you follow their professional advise and something awful happens because of it, they could be wholly or partially liable in the end.  Respond in writing with updates / actions.

Good Luck!

Benjamin,

Nathan hit it on the head!  It doesn't matter who owns the tree, you're likely in no way liable unless you've ignored their requests to trim the tree (and you didn't do anything), or failed to take care of the tree at all.  If you've been prudent and acted as a typical landlord would/should with regards to the maintenance of that tree, then you shouldn't pay them anything, nor feel obligated to do so.

So many people want to go back to "who owns the tree".  It really doesn't matter 99% of the time.  No one can control the wind.  If a tornado picks my car up and throws it into your house a block down the street, I'm not negligent.  Similar situation here.  Hold steady and keep moving forward.  Good luck!

Joshua,

Your location here in Texas is tough to say the least, and for reasons you're already aware of (assuming you're buying rentals in the coastal Texas area).  If you're investing within 20 miles of the coast, you will likely see rates anywhere from .0085 to .0107 for property, and roughly $65 to $80 per dwelling for liability.  If you purchase further North and/or West in Harris County (Tier 2), then rates should be just a little lower. 

This rate range should be pretty dependable up until hurricane season next year.  If anything substantial hits, rates could change quickly.  These rates are based off a $5k standard deductible w/ a 2% wind/hail/hurricane deductible.  

Below is an example that should help you when prospecting or budgeting:

1 Dwelling - $250,000 Replacement Cost X .0085 = $2,125 + $65 for liability = $2,190

1 Dwelling - $250,000 Replacement Cost X .0107 = $2,675 + $65 for liability = $2,740

Sai,

Before entering my current position, I spent the last 13 years selling niche products exclusively to community associations (HOA's, Condos, Townhomes, Co-op) all over the country. You MUST read the "insurance section" of your condo's governing documents to find out exactly who's responsible for what when property damage occurs.

99.9% of the time, the policy that insures the damaged item is the one that pays at the time of the loss.  Liability is rarely an issue when you have resulting property damage because it would take months to battle out who's actually responsible in court.  The unit/s would remain damaged with no parties making payments of fixing anything if everyone's pointing fingers at each other and waiting on a legal determination.  

Best case, everyone files a property damage claim and allows their various carriers/adjusters to decide who pays what, and how much.  The condo community's carrier would pay their part, your carrier (as owner) would pay your part, and the tenant's carrier would pay for their part (typically any damages to their personal property).  If the damages you're responsible for are less than (or slightly more than) your applicable deductible, then I'd suggest you hold off on filing a claim.

Condo insurance is actually written in 3 different ways, and again, should be well defined within the "insurance section" of your condo's governing documents.  DO NOT read "maintenance" responsibilities.  Maintenance and Insurance are two very different responsibilities when it comes to condos.  They should never be comingled.  Below are the 3 types of condo insurance today.  

Bare Walls - When condos first became a thing (1960's), this was the main way to write condo insurance.  To keep things simple, in this style of coverage, the condo community would be responsible for insuring every building and unit back to its "bare walls".  This means framing, brick, HVAC, electrical, plumbing, slab, and sheetrock is all the condo community is responsible for.  So, as the owner, you'd be responsible for items like texture, paint, flooring, lights, switches, cabinets, countertops, toilets, tubs, appliances, etc.  Essentially, you must completely finish-out the unit.  The tenant would ONLY be responsible for insuring their personal contents.

Original Design (aka Single-Entity or Walls-In) - This has become the "most common" way to insure condos over the past 10-20 years.  In this style of coverage, the condo community's policy would pay for damage to any building and unit back to its "original design" or finish-out by the developer.  As you can imagine, most developers build the condo building and finish out the units so they're move in ready.  In this scenario, as an owner, you'd ONLY be responsible for the cost difference in "upgraded, bettered, or added" items within your unit.  Yes, as an owner, you would be responsible for insuring the cost difference in any upgrades made by prior owners.  Just keep in mind, replacing an item (carpet) in your unit with something similar in nature is "not" an upgrade.  The tenant is still ONLY responsible for their personal contents.

All In (aka All Inclusive) - This is the highest level of condo insurance in the marketplace.  In this style of coverage the entire building and all units are insured by the condo community's policy back to it's "pre-existing condition".  This INCLUDES ALL upgrades, betterments, or additions made within the unit.  In this type of coverage, there's really nothing for the owner to insure from a property damage point of view.  Everything in the unit is fully replaced by the condo's policy, and the tenant is still ONLY responsible for their personal contents.

I hope you find this helpful, as this can be a very confusing issue for investors, owners, tenants, and even condo boards and community managers.  If you have any more questions or issues, let me know.

Peter - I posted this earlier this week.  Below is likely why they're asking these questions.  I suppose it appears to be good so they don't insure you for this when it may be excluded depending on your reply.  You don't want them to bind coverage that won't be applicable in the end.  Not sure that's where they're headed with this, but likely.

From an insurance point of view, yes, you can be sued by anyone and for any reason. Many policies do have exclusions for "dog bite", and many times the exclusion can be even broader (pertaining to any domesticated or wild animal). This has become a more common exclusion in recent years. However, there are carriers that will add coverage back to your policy by endorsement (with limitations of course).

First, they will limit the amount of coverage / protection they're willing to provide. The carriers we're most familiar limit this to $25,000 or $50,000 per occurrence.

Second, make sure you read their endorsement / coverage form before you purchase any additional coverage to ensure it fits what you need. While policies will add coverage back for dog related issues, they may continue to exclude bodily injury or property damage caused by any other animal, bird, reptile, or insect regardless of whether owned by you, in your care, or on your premises.

Lastly, as you read the policy / endorsement, be sure to read what would be considered a covered breed / type of dog. Carriers are starting to get more specific about not only the breed of dog, but the training the dog has or the history of biting.

Below are dogs that "likely" won't be covered even when dog bite protection is in your policy or added by endorsement:

1. Dogs trained to attack persons, property, or other animals

2. Dogs trained to guard persons, property, or other animals

3. Dogs trained, bred, or kept as fighting animals

4. Dogs with a prior history of biting / attacking persons, property, or other animals. This is found out via insurance records, records of law enforcement, public safety records, or any other similar regulatory agencies.

Ben M. - From an insurance point of view, yes, you can be sued by anyone and for any reason.  Many policies do have exclusions for "dog bite", and many times the exclusion can be even broader (pertaining to any domesticated or wild animal).  This has become a more common exclusion in recent years.  However, there are carriers that will add coverage back to your policy by endorsement (with limitations of course).  

First, they will limit the amount of coverage / protection they're willing to provide.  The carriers we're most familiar limit this to $25,000 or $50,000 per occurrence.  

Second, make sure you read their endorsement / coverage form before you purchase any additional coverage to ensure it fits what you need.  While policies will add coverage back for dog related issues, they may continue to exclude bodily injury or property damage caused by any other animal, bird, reptile, or insect regardless of whether owned by you, in your care, or on your premises.

Lastly, as you read the policy / endorsement, be sure to read what would be considered a covered breed / type of dog.  Carriers are starting to get more specific about not only the breed of dog, but the training the dog has or the history of biting.

Below are dogs that "likely" won't be covered even when dog bite protection is in your policy or added by endorsement:

1. Dogs trained to attack persons, property, or other animals

2. Dogs trained to guard persons, property, or other animals

3. Dogs trained, bred, or kept as fighting animals

4. Dogs with a prior history of biting / attacking persons, property, or other animals.  This is found out via insurance records, records of law enforcement, public safety records, or any other similar regulatory agencies.

Angela,

I recommend you visit with another agent (or two) about your exposures, and preferably one who works specifically with investors already. See what they have to say and offer. Options are always great. I would certainly make sure one of them is an independent agent who can shop multiple markets and many different options on your behalf. In most cases, a $1M / $2M liability policy is enough for someone with only a few properties. You certainly want to ensure that both properties are adequately protected from physical damage (fire, lightning, water, wind, hail, theft, vandalism, etc.). As you grow, you certainly want to look more into higher limits of liability or an umbrella policy. You're correct in that this decision is completely up to you, but when it comes to umbrella coverage, I tell investors to think about these main items below when making their decision.

#1 - How litigious is the state / area you live in (Google search it if you don't know)?

#2 - How many dwellings do you own / rent (the more you have, the more you should consider an umbrella)?

#3 - How affluent is the neighborhood your dwellings are in? The larger and more expensive rentals will "likely" attract people with more means to sue you.

#4 - Do most of your tenants have kids? An injury/lawsuit that involves a child typically produces the more high-dollar claims.

#5 - Do you do short term / vacation rentals? The more people you have coming and going from your dwelling, the more exposure you have.

There are always more exposures to consider, so don't stop here. Each investor's situation and exposures are different from the next, but this should be a good place to start. Also, make sure you completely understand what the umbrella coverage is providing excess coverage for/over. Some personal umbrellas may "not" extend adequate coverage over your rentals. 

Hope this helps! Good luck!