All Forum Posts by: Donald Stevens

You can buy a builders risk policy which usually has a minimum premium of $500 or you can buy from a specialty insurance company that writes vacants while being rehabbed. It takes a specialty agent to write those types of policies.

That's a good question for bigger pockets. Can a PM hold rent payments from an owner for not being listed as an additional insured? Will the rent payments still be in the account when the issue gets resolved? Why were they accepting tenants and rent payments in the first place (acting as a PM ) without being listed as an additional insured? I would think they would have to decline being your property manager and the rents would have to be paid direct to you since you would in effect be the PM for your own properties, correct? By collecting rent payments they are currently on the hook for whatever liability they are trying to avoid. Weird or possibly even sinister. Be careful and get some legal advice asap. IMHO

If the PM were to be listed as an additional insured, they would be listed on your policy's liability. It sounds like you don't have liability insurance at all, that could be one of your issues. Condo associations don't offer liability for the individual owners, its only for the association.

Most insurance companies now are not allowing PM's to be listed as additional insured. One issue is that a property owner manages properties for multiple owners and there could easily be some confusion as to who is liable when a property manager is visiting multiple properties. Also the insurance companies don't like to add property managers because they don't underwrite the PM, so if a PM is not removing snow or dealing with fallen branches or whatever they are obligated to do, then the insurance company can be forced to pay for that exposure. It is also hard to identify a bad PM if there are not being underwritten which creates a very large unknown risk for the carrier. Rates and coverages are based on risks that actuaries can evaluate and calculate.

First off, a good PM should have their own insurance. They should also be aware of the property conditions and notify you of any potential liability issues they believe is present to protect themselves and the property owner. They may want to be listed as an additional interest so they are notified if the owners policy cancels and then the PM is not exposed to managing a property without insurance which increases the PM's risk.

This scenario is kind of like your landscaper asking you to buy insurance listing them in case there is an issue of liability while they are cutting your lawn, it doesn't happen. The PM is held accountable to their duties and responsibilities and they should work with property owners that are going to take responsibility to protect the public from potential exposures and will follow the advise of the PM so the risk is minimized for both parties.

Lastly there are a few companies that will list a PM as an additional insured but they seem to be a dying breed (probably due to claims experience).

Wayne is right. Insurance is about making the "insured" whole again. Even though the insurance is on the house, the named insured is the one who gets paid for their loss.

Also a builders risk policy is an option. There are also a few companies we work with like Foremost that write vacant with rehab on a dwelling policy where you can pay month to month. There is no minimum premium so it works well for investors.

Those rates look pretty good for the Houston area. We are always looking for better companies with better rates for our clients. Do you know which companies those brokers placed you with? Thanks for any help you can give.

ACV is replacement cost minus depreciation. Very similar to an auto policy, the older the car gets, the less its worth. The problem with ACV is the insurance is for the value of the homes materials, not what it costs to rebuild.

You usually have three choices for how to insure your home.

Replacement cost will rebuild your same home with new materials.

ACV will pay what your home materials is worth. A 20 year old kitchen is worth a lot less than a brand new one.

Functional/Modified Replacement cost. This allows you to insure for market value ($49000 in your example) while giving you repair/replace coverage for a partial loss.

Replacement cost coverage is usually the most expensive option offering the most protection. Functional/Modified Replacement cost is usually the least expensive because you are insuring the property for market value (usually significantly lower than replacement cost) and the insurance company can cap their losses at a much lower amount.

Most lawsuits are started by someone doing what they are not allowed to do. No one allows someone else to get hurt unless it is complete negligence which is usually not the case.

What do you consider a good insurance company? Is it the rate or the coverage? Do you have expectations of coverage or rates that you can't find?

Sometimes getting into the landlord business creates a learning curve and you may find the policies cost more and provide less coverage than what you are used to getting. If you are looking for the same coverage and rates you get on your homeowners, that could be difficult. Your personal home is a lower risk than a tenant occupied home.

When you say buy and hold I'm assuming the building is vacant during this time. If that is the case, that could be why you are having a hard time getting replacement cost coverage. There are only a very small amount of companies that would be willing to do that and a lot of them are for high value homes (500k and above).

The problem with Replacement Cost in todays market is someone could easily buy a home for $50,000 that costs $300,000 to replace. There is a big incentive to let the house burn a little longer before getting the fire department involved. Its called a morale hazard. It means there is something to gain by having a loss so it creates an additional exposure for the carrier.

That being said there are companies that write it but you have to find an agent who was the knowledge and access to those companies to help you.