All Forum Posts by: Bo Bond

Carol,

See if your insurance agent/carrier can add your names as an Additional Named Insured or Additional Insured to your policy to suffice the lender.  Some lenders are okay with this and will move on once provided.  It's worth a shot.  Good luck.

Brandon,

I'm not a landlord, but can give you an insurance related response if that helps you.

Additional Interest is "typically" applied when the other entity has a financial interest with the landlord.  In this case, the Property Management company likely doesn't have any financial interest/tie to the landlords investment.  I don't see where additional interest would apply here.  Additional interest would make more sense for a bank/lender to request.

Additional Insured means the landlord would actually be an insured party under the property management company's policy.  I certainly think you should request this whether the PM's carrier approves it or not.  This better protects the landlord.  The property management company has been hired to do a job, and if they somehow cause property damage or bodily injury to a third party due to their negligence, the landlord doesn't want to come out of pocket for this loss, nor do they want their policy to be triggered first.  By being added as an AI to the PM's policy, their policy would respond first in the event their employee (the PM) was somehow negligent.  This is no different from a landlord hiring a contractor to do a job and requesting to be added as an AI under their policy.  Yes, you should be doing this to protect yourself as a landlord.  This doesn't mean you'll always get the AI status with everyone you hire to do a job, but many companies/contractors know this is a typical request and are prepared to agree to these terms.  Hope you find this helpful.

Adam,

I can help with the insurance part of your question.  

While it's completely up to you, I can tell you that most investors I've dealt with seem to start out using agents they're most familiar with and tend to have separate policies for each of their rentals.  The issue with this is that as you grow, you will likely reach a threshold where that particular carrier doesn't want to insure any more of your rental properties.  If you have an independent agent, then they can shop other carriers and keep moving forward, for find you a policy that can bundle them all under one policy.  If it's a direct writer carrier, this may be much harder for them to do depending on what level of flexibility they have within their company.

In either case, at some point you're likely to want one single policy that can insure all your properties.  At what point you reach that threshold is completely up to you, but for most it seems to be around 10 rentals.  The main reason is because you're likely to have 10 different renewal dats to mess with throughout the year, 10 different coverage forms to review and worry about, likely to have different deductibles and endorsements on each policy, different carriers, etc.  Having to mess with insurance renewals 10 different times in a given year can be a paperwork / tracking nightmare.  So the more rental properties you have in your portfolio, the more likely you are to want them insured under one single policy with one common renewal date.  This means you only mess with insurance once a year for all properties (unless your adding, removing, or refinancing properties).   

Most independent agents have access to tailored products that can do this bundling for you.  Bundling alone "usually" isn't what's saving you money.  The agent shopping markets and carriers for the best coverage and rates is typically what's driving the savings.  With some agents, a single policy for each rental can save you just as much as a bundled option can, and in other cases it may not compete well at all.  It's more about the carrier's current rates and their underwriting flexibility.  My suggestion is to test both, and go with what fits you best right now.  Then as you grow your portfolio, you test those options again (shop your insurance w/ other agents & carriers) when you feel it's necessary.  Hope you find this helpful.  Good luck!

Chris,

I'm not sure if this is a true HOA, a Condo, or a Townhome based off what's stated above. That might help. If this is a true single-family HOA, then the HOA wouldn't have any insurable interest in this home, and I wouldn't see any viable reason for them to comment on the issue or give anyone a incident report. However, if this is a condo or townhome community, then there absolutely may be reason for the association to also file a claim, as they may insure some portion of the building.

Whether the association insures any portion of this building or not, each owner/tenant still needs to file a claim for damages to the property that they're specifically responsible for insuring.  All parties should have insurance in place.  

Just because the unit above has a leak "does not" mean they were negligent.  If a pipe broke in a wall/slab, or a line to the washing machine, ice maker, fridge, etc. busted, how is that the upper units fault/negligence?  More than likely it isn't.  This would just be an unfortunate event that no one could have predicted or seen coming.  It's the same as someone's electrical wiring in their upstairs wall sparking and burning the building down.  You can't blame that on the upper unit just because that's where it originated.  You can't maintain wiring in a wall, and you can't maintain pipes in your walls / slab.  Both parties need to file claims and allow their adjusters / carriers to work it out.  I can see both carriers paying for the damage to their insureds unit.  If the association is to insure some portion of this building, then they should do the same.  

Keep in mind that in the event someone is truly negligent (left tub running and it overflowed, left towel on stove & it started a fire, etc.), then both parties should still file claims, both carriers will likely pay out, and then one carrier "may" (completely up to that carrier) subrogate against the other carrier since their insured was negligent / at-fault.  

I know it can be difficult to work through issues like this when you don't deal with it on a daily basis, but I hope this helps.  Let me know if you have any other questions / direction on this one.  

Naga,

Great details and information provided by the gentlemen above.  I may have missed it, but I don't think anyone above suggested visiting with another agent who specializes in insurance for real estate investors.  This advice and direction should be coming from your agent whether you ask them for it or not.  They should already be providing you with multiple options and direction based off what you've described to us (especially when your value has moved from $50k to $250k).  Yes, rates, values, premiums, deductibles, etc. are trending up due to many factors influencing insurance and construction nationwide, but shopping your insurance with multiple carriers should be a must for your current agent.  

The premium you presented above does seem high for GA though.  However, the value on file is the primary driving force for your premiums, so jumping from $50k to $250k will have a tremendous impact on your premium.  I'm willing to bet that your $450 premium for $50k in value/coverage was a carrier's "minimum premium".  This isn't uncommon since you're values were so low ($50k).  However, below is the rate for your dwelling now that the value has been moved up to $250,000.

$1,650 premium / $250,000 value = .0066 rate

I'm assuming this ($1,650) is a combined premium for both property and liability on one dwelling?  If so, it's still higher than what we're currently seeing in GA (seeing combined rates around .0055).  If you only have a few rental homes, then this likely won't be a huge issue for you.  However, if you have 5+ rentals, then you're likely paying hundreds of dollars in extra premium "per dwelling", which will add up very quickly with a sizable portfolio.  Below is what you should be looking for in your area.

.0055 rate X $250,000 = $1,375 per dwelling (for property & liability w/ a $5k deductible)

Hope this helps.  Let me know if you have any other questions. 

Ryan,

Assuming you have typical limits for your general liability ($1M / $2M), then another $1M+ for an umbrella policy would likely be pretty inexpensive.  If you can afford it, go for it.  I think this is wise, especially as you gain more and more exposure and look to expand your current portfolio.  

There's really no exact science when it comes to purchasing an umbrella (or excess limits of liability).  It's really a judgement call.  I will say that people get sued for $1M all the time now.  That use to be a lot of money, but not so much anymore.  That doesn't mean you have to go out and purchase umbrella coverage today though, or that you should.  If you're a very prudent and fair person/owner, then most of your potential issues can be managed before they ever reach the point of a lawsuit.  However, you purchase an umbrella for the worst case scenario.  While most death claims typically pay out around $1M, it's the long lasting injuries to a third party that you may be liable for that could go well beyond $1M.  I do think the element of college students adds to your exposure, and is good reason to at least consider umbrella protection.  

Below are some items to consider when deciding to purchase an umbrella policy or not.

#1. How many dwellings/rentals do you have in your portfolio (5, 25, or 200)?  The more you have, the more likely you'd need umbrella protection.  

#2. How litigious are the areas where your rentals are located?

#3. Have you ever been sued before?

#4. Do any of your rentals have unique exposures (pool, playset, pond, significant drops in elevation/grading, high traffic area, etc.)?  College students is one to consider as you've mentioned above.  Anything that adds to what you feel is the standard/typical level of exposure for a rental should be considered for umbrella coverage.  What you consider to be standard/typical exposures will differ from the next investor.

#5. Do you tend to rent A, B, or C properties?  A and B tenants "likely" have access to more money or contacts to sue you.

Wendy,

Contact Jason Bott (https://www.biggerpockets.com/...).  He posts a lot on BP and is an agent out of Milwaukee.  I'm sure he can help you.

Wendy,

What RC Value did you give REIA for this 3,800 sf. duplex, and what city / state is this duplex in? While there are other factors that can affect premiums, I can help you with the math so you can make educated assumptions going forward when you analyze other opportunities. Also, did this include liability coverage, or are these premiums below for property only?

Wendy,

I'd recommend Jason Bott up in your area.  He's been on this platform for years and should be able to help.  https://www.biggerpockets.com/...

Nicki,

Yes, you need to investigate landlord insurance / policies / agents (especially as you grow your investment portfolio).  Many specialty products like the one we sell to investors require that you have at least 3+ rental properties, while other programs may not.  It seems that many investors use their personal lines insurance agents to insure their rentals until they hit about 5-10 properties.  This is likely out of convenience and being comfortable with their current agent.  If you're getting great rates, coverage, and service, why not!

However, once they reach a certain point (everyone is different), having all your dwellings under one policy makes a lot more sense from a paperwork, time management, and tracking point of view. Having 5-10+ different policies, possibly multiple carriers, different policy numbers, different levels of coverage, different deductibles, different rates, can get exhausting and become really hard to keep track of to say the least. Having one common insurance renewal date for all your rentals is a lifesaver, along with a program that can add multiple different types of rentals (SFH, duplex, triplex, quads, fix-&-flips, townhomes, small office rentals, small apartments, etc.) to your policy is a huge plus.

These are just some things to keep in mind as you grow your investment portfolio. Good luck and congrats!