All Forum Posts by: Tim Norris

Hey Kelly (and Mike, Steve!),

Think of the liability insurance as working together with the type of entity you create/use to own investment properties. The choice of entities would incorporate things like tax issues, estate planning, as well. That stated, it isn't much premium difference to go to $1MM. My advice is to segregate your personal assets/insurance from the investment insurance. Don't want to tie those things together. Hope this helps.

Tim

Which option you take should be based upon your strategy for the individual property. Replacement Cost (RC) coverage allows you to recoup the depreciation that is initially levied against the claim settlement. Actual Cash Value (ACV) coverage does not. However, most of us in RE do not pay "retail" for labor/materials. Accordingly, many times the initial settlement, with depreciation levied) is still enough to repair damages. "Reconstruction Cost" is not Replacement Cost. It should indicate the value it would take to rebuild the property in the event of a catastrophic/large loss. If your strategy in the event of such a scenario is to pay off whatever debt may exist, then raze and sell the lot, then an insured value that is of "reconstruction cost" may be costing you too much premium. In other words, if you ultimately would repair partial losses, but sell in a "total" loss (after garnering the insurance benefit), then "over-insuring" doesn't make much sense. You should really address this issue at the "business model level", so you don't end up giving the insurance company more than the need to cover what you really have at risk. Keep in mind, the co-insurance requirement may hold you to certain levels of insured value, whether you like it or not (with many/most insurers). As such, we use the policies without such "co-insurance requirements" when applicable.

On a related note, about 60% of claims to investment properties are caused by tenant negligence (think kitchen fires, etc...). If the DON'T have renter's insurance, they likely have sufficient assets to indemnify you (for your deductible) or your insurer (for the damages). The most important reason to require and enforce renter's insurance is for the claims they cause...

Correct, typically liability is written on an "occurrence" basis, meaning whatever policy was in place at the time of the incident should respond. Good reminder to always get liability coverage even for properties you only hold/control for very short periods---never know when you need it...

Hi Edita,

That is fairly common, in our experience.

Tim

Just remember, unless "you" insure it (as the "first-named insured"), then you are not the primary beneficiary of the coverage/benefits when needed.

Late to the discussion here, but we developed a pretty attractive alternative to the traditional "force-placed" coverage with the American Association of Private Lenders (http://aaplonline.com/). Their members were running into the same challenges mentioned here. To avoid re-stating all that has been spelled out in this thread, I would simply concur with the points relative to insurable interest...of which you do have, of course.

Good call on the plastic, too!

Sorry to hear...If the property is vacant, it is more difficult than ever to garner coverage that includes theft. Such occurrences have become so common that the insurers simply exclude or diminish coverage for them. Even if occupied, theft of copper, etc...is a peril that the industry will continue to monitor closely. Unfortunately, it is not likely to get better soon. One of my partners has gone as far as to remove AC units upon acquiring a property, only to re-install when the tenant moves in...

Relative to the insurance, please review this: http://www.nreinsurance.com/Insurance-Issues-for-the-Sub2-Deal.pdf

I have posted it in other threads relative to sub2, so hope it helps.