Insurance for Your Investment Property

Recently I had a client purchase a new investment property. He had valid concerns regarding the coverages for that investment property. Below are coverages to consider for maintaining the profitability of your investment property.

  • Contents – Many owners of investment properties forgo coverage for contents or personal property kept at the investment property. They assume the tenant will provide all coverage for the tenant’s contents. What if the property owner has to re-carpet the home or puts new appliances in the home? These types of items can be considered contents by the insurance company. What if the property owner uses the basement or attic for storage? These are considered contents. Contents coverage is not automatically included in all investment property policies. You must request it and indicate a limit needed to cover all contents of the property owner.
  • Fair Rental Value – If the property owner is unable to rent the property due to a covered loss the property owner will not be able to generate a profit from the property. Depending on what the cost of rent is will dictate the limit for Fair Rental Value. You should aim for 6 months of rent or more after a covered loss, which can also be impacted by time of year or location of the home.
  • Water Back-Up – This is a very hot topic when it comes to home insurance but many property owners overlook it when owning an investment property. An investment property has the same exposure to water back-up as a primary home; sump pump, back-up generators, toilets, tubs, sinks, etc. To make matters worse not all insurance companies offer water back-up on investment properties. Make sure to ask for it or your insurance agent may overlook it during the quoting process.
  • Ordnance or Law – In some cases especially with older homes there may be a need for additional money for updating an investment property to meet new codes or compliance requirements, such as sprinklers, smoke detectors, elevation, safety glass, etc. Not all policies are created equal. You may have 10% of the dwelling value which may or may not be enough depending on the property. An increase in the limit may be necessary for homes that are coastal, older, located in the city, etc.
  • Loss Assessment – Some investment properties are located in communities that have a Homeowners Association (HOA). As a home owner in the community the association has the right to assess fees back to home owners. Not all investment property policies provide Loss Assessment and if they do it may not be enough. It is best to understand what the HOA can assess for and how much they can assess. Once this information is known you can adjust the insurance policy accordingly.

Ultimately the plan for owning an investment property is to generate a profit or a return on your investment. Without the appropriate insurance you could lose money due to unexpected issues.  A full assessment at the beginning of your endeavor reduces the chances of problems down the road. Talk to your independent insurance agent today about your investment property insurance needs.

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Do you need Rental Reimbursement on your auto insurance?

The short and sweet answer is yes but I am not the short and sweet type when it comes to insurance. So let’s dig a little deeper.

Many individuals dont think they need it and many times forgo it to save money. Honestly this coverage is only about $30 to $40 per vehicle annually, if not less. That’s not alot when you consider it’s an annual cost and what it means for you.

Recently I had a client find out the hard way how important Rental Reimbursement is. Another vehicle hit my client’s vehicle while parked and unoccupied. Initially the client attempted to have the claim handled by the responsible party’s  company. However the adjustor was indicating the vehicle was a total loss and that decision made the client uncomfortable. Add on the client had paid extra money for Replacement Cost coverage on the totaled vehicle on their own auto insurance policy. The client attempted to go back to their own insurance for Replacement Cost coverage but it was determined they had no Rental Reimbursement on their own auto policy. The claim process would start over with the client’s own insurance company and leave them out of pocket for another rental vehicle.

In the end the client settled with the responsible party’s insurance company to reduce the amount of stress and move on ultimately.

Had the client opted for Rental Reimbursement when the policy was purchased the client would have had a completely different result.

Yes, you can shave off a few dollars on your auto insurance by not including Rental Reimbursement but it can have a severe impact at the time of a claim.

So purchase Rental Reimbursement for all of your vehicles. I recommend a limit of $40 per day based on the average cost of a small rental vehicle. You can certainly bump it up if you will need more rental vehicle, such as a mini van or SUV.

An independent agent can help you pick the right limit and find a competitive auto insurance policy for you.

Why you should shop your insurance.

Previously I gave reasons why you should not shop your insurance. My goal is not to discourage people from shopping their insurance but to help people be smart about managing their insurance. There below are valid reasons for shopping your account.

  • Major lifestyle changes are a valid reason. Marriage, divorce, a child getting licensed, a child moving out, starting a new business, retirement, etc. Your current insurance company may not have the most competitive pricing once these changes are applied to your account.
  • Purchasing a new home, condo, etc. Selling your home and renting. Again the current insurance company may not be the most competitive based on your new home situation.
  • Change in net-worth or value of your assets. If your net-worth has increased significantly the current insurance company many not be providing you the broad coverage you now need. They may also not be able to provide you the coverage or policy limits your financial advisor, attorney, or accountant are now recommending.
  • Change in the coverages desired. If you now want full glass coverage or GAP coverage or Agreed Value on your vehicle you may need to change insurance company. If you need workers compensation insurance you may need to change insurance companies. If you sit on boards or volunteer your time to associations or committees you may need a different insurance company.
  • Bad claim experience. If you find that your insurance company was uncooperative, lacking in communication, difficult to work with or any other reason and your insurance agent could not help you work through it there is no reason you should torture yourself again in the future.

Ultimately you should not shop your insurance frequently or even every year. You will lose out on valuable coverages, benefits, features, etc. Your program should be reviewed annually but only shopped every 3 to 5 years. If you feel your need your program shopped talk to your insurance agent about why you should or should not shop your insurance program. Your agent will have a good sense what you can do with your current program and if having your program shopped is warranted.

 

Why You Shouldn’t Shop Your Insurance

 

Now that the New Year has begun many individuals and families have resolved to improve their finances. This includes reducing their debt, reducing monthly expenses, saving more money, or saving more for retirement. This plan almost always leads people to shop their insurance policies. I do not encourage this decision 100% of the time. Below are reasons not to shop your policies.

  • Before you shop your policies you should look to save premium on the policy you already have. The insurance company you are with will have a different opinion of you then the company you are looking to switch to. A new company has stricter guidelines for new customers than for existing policyholders. If you have driving history or are a bad pay history you may not qualify for the new company.
  • If you do qualify for the new company you may pay more premium. All reports the insurance company uses will be run for a quote. This includes credit history if your state allows credit history as a rating factor. Also Motor Vehicle Records (MVR) for tickets, citations, violations, and license status. A Comprehensive Loss Underwriting Exchange (CLUE) report will also be run to disclose accidents, driver and vehicles in the household, and claim payments made by prior insurance companies. If your credit history has declined you may not be eligible for the best priced tier. Based on your overall driving history you will be tiered with the new company. Your current insurance company may not have a violation or accident rated due to failing to verify reports or possibly violation/accident forgiveness.
  • You may be receiving a longevity credit with the current insurance which you will not get automatically with a new company. Also if you have little to no tenure with your prior insurance company you may lose out on valuable credits on the new policy.
  • You may lose a violation or accident forgiveness benefit if you switch your insurance company. For some companies you need to be with them 3, 5, or even 6 years to gain this benefit and you may be giving it up if you have a major accident after switching insurance companies.
  • Not all insurance policies are created equal. Each policy and insurance company has a different insurance contract. When you switch insurance companies you may be losing valuable insurance coverage or policy language. Although limits and deductibles may be identical on the policy declaration page it does not mean all the same benefits and features are in the new policy.

If you must shop your policy you should not shop your policy more than every 3 to 5 years. Insurance companies make major changes to their insurance products and pricing in this range. When you do receive a quote make sure you complete a through comparison of your policy against the quote.

Always use an insurance professional for this process. Insurance professionals know the policies they sell better than anyone else. They also will know if the product you are looking to switch to will provide you similar coverage as your current program and the tricks to getting your best price. An insurance professional can also help you review your current policies to save money so as to avoid losing valuable coverages and benefits by shopping your policies.

What is water back-up coverage?

Recently I had a conversation with a client regarding water back-up. They recently purchased home insurance and in reviewing their home policy I noted that they only had $5,000 for water back-up.

The standard home policy does not provide coverage for water back-up. In fact you will see an exclusion for water back-up. Water back-up is considering water that backs up into your home from a drainage system. It could be a sump pump that fails. It could be a toilet that overflows. It could be a shower drain that backflows. It could be a hot water heater that breaks. The easy way to think about it is water back-up is any drainage system to your home that could back-up or overflow.

Water back-up is not flooding. Flooding is water from the outside your home coming in through the foundations, windows, doors, etc.

Why is water back-up so important? It is one of the top causes of homeowner claims across the country. Every homeowner will experience at least one water back-up loss in their lifetime. 

Secondly, the average water back-up claim is $20,000. Think about it… you clean up the free flowing water, you need water mitigation to dry out the floors, the walls, and the room to reduce the chance of mold. You may need to replace the flooring and the walls. And possiby some furnishings. And you may still have mold after all.

In some cases a water back-up loss could mean a total loss of your home. Think of sewage back flowing into your home.

Kind of scary stuff.

So what do I recommend? I recommend full water back-up coverage. This doesn’t mean up to the total value of the stuff in your basement or the basic limit for water back-up. Water back-up should be up to the dwelling, other structures, personal property, and loss of use policy limits.

Yes, water back-up can be expensive but is it more expensive then the cost of the average water back-up loss? Water back-up coverage has gotten more expensive of the years because of the frequency of such claims and the average cost of a claim.

If your insurance company doesn’t provide full water back-up coverage as we insurance professionals call it then find another insurance company. This applies to rental and investment properties.

Have your insurance agent review your policy today to determine if and how much water back-up coverage you have.

Thanksgiving Day Safety

Thanksgiving is my favorite holiday of the year. Probably thanks in no small part to the fact that turkey is one my favorite foods. Needless to say I will be getting my fill in the coming days.

However, the Thanksgiving Holiday has one of the highest counts of home fires than any other day of the year. Statistics show that home cooking fires are 3 times more likely to happen on Thanksgiving than any other day.

Below are some quick tips to reduce your chances of a home cooking fire this Thanksgiving…

  • Never leave your food unattended while cooking.
  • Use a timer and routinely check whatever you’re cooking.
  • If frying or deep-frying, keep the fryer outside, away from walls, and free from moisture.
  • Never use a glass casserole or lid on the stove or burner, as it may explode from the heat.
  • Ensure that pot holders and food wrappers are a safe distance— at least 3 feet—from warmed surfaces.
  • Position pot handles to the back of the stove to avoid anyone bumping into them.
  • Avoid dangling accessories or loose clothes while cooking.
  • The stove will be hot, keep children 3 feet from the stove at all times.
  • Be sure electric cords from electric knives, coffer makers, plate warmers, and mixers are not dangling off the counter in reach of children.
  • Never douse a grease fire with water, as the fire can thus spread. Turn off the burner, smother the flames with a lid, or douse with baking soda or a fire extinguisher if it’s getting out of hand.
  • Keep a fire extinguisher handy in the kitchen, and know how to use it.
  • Ensure your smoke alarms are connected and working.

I hope everyone has a safe and happy Thanksgiving Holiday!

Gobble! Gobble!

Pamela

Winter Is Coming

Yes, I am a fan of Game of Thrones. It is something my husband and I were able to binge watch in the evenings over the summer and are looking forward to watching when it airs next year.

With winter quickly approaching it is time to batten down the hatches for the looming cold temperatures and wintery precipitation.

Here is a quick list of things to check off as you prepare for winter…

  • Clean out gutters of any debris for proper drainage and to reduce the chance of an ice damn.
  • Disconnect and drain all outside hoses. If possible, shut off outside water valves.
  • Repair roof damage and remove tree branches that could become weighted down with ice or snow and fall on your house or your neighbor’s house.
  • Wrap water pipes in your basement or crawlspaces with insulation sleeves to reduce the chance of freezing.
  • Clean your furnace and replace the filter to reduce the chance of fire.
  • Have your chimney and/or flue inspected to make sure no animals are nesting there.
  • Test or install smoke and carbon monoxide detectors. Replace the batteries twice a year.
  • If your house will be unattended during cold periods, consider draining the water system.

Whether you live in a single family home, condo, or apartment be prepared for the freezing temperatures and the mounds of snow and ice to come.

By following the simple steps above you can reduce your chance of filing a home insurance claim and have a cozy winter season.

You can find more information about preparing for winter by visiting…

http://emergency.cdc.gov/disasters/winter/

http://www.ready.gov/winter-weather

http://www.weather.com/safety/winter

Pamela