All Forum Posts by: Derek Lacy

@Jason A. 

If you do not have an underlying policy with your umbrella, you're in for a HUGE surprise come claim time.  That means you have at minimum a $300,000 deductible on any lawsuit (excluding defense, that's $300,000 in actual damages awarded).

I understand lay terms verses insurance terms. 

@Jim C. 

You most certainly can get a liability only policy.  Most Erie agents are not true independent agents, yeah they can write progressive and a few other small insurers, but they are expected to send 70-80% of their business to Erie.  Trust me, I turned Erie's contract down when they stated that's how they operate.  You need a true independent.  I would highly recommend in the Indy area, to get a comparison quote on an admitted Berkshire Hathaway quote or even a local mutual like Indiana Farmers.  You'll be happier with the quote., again we can always run that, or if you prefer someone on the northside I see if I cannot find a referral.

You cannot get an "umbrella" policy without underlying coverage.  If you did, by definition it would not be an "umbrella" policy.  An umbrella policy is an excess liability policy, meaning that there must be a primary policy. 

With that being said, umbrella is the most misused moniker for a policy.  Insurance people have a very specific meaning for that word, most insureds do not.  You can certainly buy a $10,000,000 General Liability policy to go over 1-10,000 single family dwellings and never touch an umbrella policy, but 9 out of 10 investors will call that an umbrella policy. 

To the same, "Self-Insured" is being misused above.  That is more correctly defined as "uninsured."  People like to misuse self insured for uninsured because one sounds better, but self insured means there is an insurance captive (self owned insurance company) somewhere out there, to be fully self-insured.  You cannot prove work comp to a state regulator by just not having it, there is a formal process to self-insured.

Lastly, to the original poster@Jim C. , living in Indianapolis, and knowing a lot about insurance, repeat this mantra when thinking about insurance.  Indiana is a high risk insurance state.  With the new weather patterns (think hail storm every year, high winds every other month, etc), we are no longer low risk with whatever is changing.  So premiums are going up. 

There are three ways to deal with it.  Grin and bear the increases.  Increase retention (meaning up your deductible), but also look at things like putting on hail proof roofing, etc, or go uninsured and maybe increase loss control as well. 

My suggestion is call an actual independent insurance agent and see what can be done.  With a clean claim record they will have an insurer that can do better than Erie. 

You are confusing admitted and non-admitted insurance companies with agencies. 

We are licensed in the State of TX.  Now there are insurers that may sell policies but choose not to submit themselves to the TX regulators.  Those are called non-admitted insurers, they are not covered by the guarantee association set up by the State of Texas.  Now, with that being said, they are most likely admitted in an different state.

When you are dealing with non-admitted insurers you are dealing with the largest of the insurers in the world (most of the time).  An example would be United States Liability Insurance (part of Berkshire Hathaway).  Do we really think the largest insurer in the world would go belly up on a rental home claims?  Another is Scottsdale, part of Nationwide Mutual.

Most likely we would use an admitted insurer unless VERY special circumstances come up. 

Here is the issue.  Vacancy clause on a dwelling/homeowners policy.  A normal vacancy clause excludes theft, vandalism, water damage, attempted theft, sprinkler leakage, and glass breakage if the building has been vacant for over 60 days.  And that is a very giving vacancy clause, others may exclude any and all otherwise covered damages (read your policy, there is no standard answer in insurance). 

A Builders Risk does cover that, as it contains and assumes the property is vacant. 

Now again, anything is possible in insurance.  I have a policy that they will cover from a tax sale purchase (before redemption) the value of the tax asset, to renovation, to occupied, and vacant.  It picks up flood and earthquake (except CA) and it even allows you to pay one month at a time (for those investors that have high turnover), if you are the property manager/contractor you can even insure a clients property for them (if so inclined).  It contains no vacancy clause, etc. 

Now that is a specially crafted policy for a special circumstance, but anything is possible in insurance.  If you are thinking the first agent is telling you the truth, as for a sample policy.  This is very normal in insurance, you are only asking for the contractual language that you will be signing up for.  If they cannot provide a sample policy contract, something is probably wrong.

Just remember Jennifer Lopez had her hind-side insured, you can certainly get a dwelling policy to cover vacancy and renovations, but it's not standard and enter into such agreements with skepticism and due diligence. 

Correct, every renters policy has liability coverage, most at least $100,000.  Our office actually can work with investors or property managers to put together what I would call "forced-place renters insurance."  Much like if you have a mortgage on a home the mortgage company will place homeowners coverage covering their interest in the home, you can purchase renters insurance on their behalf.  Usually about $10-15 per month (paid on a monthly basis), and you just tack that onto their rent payment.  So if rent is $600 a month, they owe $615.  If they don't like the extra $15, tell them to send you a copy of their renters policy to get into compliance with their lease agreement. 

Two items that are often overlooked. What coverage form and what valuation. I have no suggestion of either basic or special, replacement or actual cash value, ask those questions so you at least understand what your buying. Coverage form is what they are covering you against, valuation is the value applied. If they ask you what did you pay for it, and use that as the value, run far far away. I've never seen an insurance policy that used market value, but I've seen most have a penalty for underinsurance, and that penalty states the adjuster is the sole decider of valuation.

A septic systems maintenance or breakdown would never be a covered claim. It is not covered property or is it a covered cause of loss. So as stated above, risk management of an inspection and sinking fund (almost literal meaning here) would be the best advice.

On the above. 1. Insurance covers your negligence, that's mainly what it covers. 2. If there is a civil suit, that is either do to your negligence or tortious actions (one item of note here). 3. Divorce? Actually an LLC complicates the issue as the judge will split the business asset, in theory it's more costly to have an LLC as transfers cost more. 4. In death your LLC is a personal asset included in probate. 5. There are reasons, but in my opinion the burden of taxes, compliance, hiring an attorney for anything that happens, it's just too great for the small benefit of not payin a few hundred for umbrella protection. The note above, to have torts covered, you need to make sure "personal injury" is covered. It is usually a line item on coverage. About limits on houses, we have some insurers that state 4 houses. Which is fine, that's why we have other insurers that state unlimited houses. We even have insurers that will write over 22,000 houses, almost all states, one policy. They'll do the same with three houses too. So it just depends on the insurer.

We can do that. For recommendations, see our website myabi.com there is a full page of recent (last several month) testimonials. My email is [email protected]. We can always discuss further. We use several nationwide A+ rated insurers. Just depends on your needs.

You are correct in builders risk insurance.  Do realize that it will only cover you while construction activities are on-going and certainly never after occupancy.  There is no clear cut rule on this, as a builder risk policy does not have a standard policy language, so always read your policy.  Ask questions of the broker on the policy, and do not hesitate to ask for a sample copy of the policy so you can review the cancellation clause. 

We have a great nationwide market for builders risk, so if your preferred agent cannot help do let us know, we would love to help. 

As far as your umbrella liability from your car insurance agent...  Probably not going to help you here.  That is most likely a personal umbrella, and this is a business venture (specifically excluded by the underlying policy), so you may want to look into General Liability.  Depending on your state you may have a work comp issue too.  Meaning they may view you as the general contractor (remember this is by old laws written in the 20's and 30's) and you may be ultimately responsible for any worker injury if not otherwise covered.

Good luck, I hope the other house flippers can give you more advice, I'm a hold investor and insurance agent.