5 Keys to Insurance for Real Estate Investments

5_Keys_to_Insurance_for_Real_Estate_InvesmentsHave you structured your insurance correctly for your real estate investments? Insurance is one detail that you do not want to make a mistake on because once you discover you’ve improperly insured one or all of your real estate holdings, it’s usually too late! Did you know that when a major hurricane is closing in on the United States, insurance companies stop issuing new policies? So you can’t wait until a storm is about to hit before you get your insurance act together. You’re about discover what most investors do not know about insuring real estate investments, including the biggest insurance mistake far too many investors make. You’ll learn 5 crucial points about insurance that can help prepare for when (not “if”, but “when”) disaster strikes. After watching this video, the goal is for you to better understand if you are properly insured and become aware of changes you may need to make. Here are the 5 keys to insurance for real estate investments:

 

Here’s a summary of what you learned in the above video

 

Key # 1 – More Than One Insurance Broker

 

An insurance broker represent several carriers while the typical AllState or State Farm insurance agent represents only one carrier. Further, not all insurance brokers write policies with the same carriers so you may find that each has their own strengths.

 

Key # 2 – Correct Type of Policy

 

  • Landlord ($): For properties that you will be renting to tenants.
  • Vacant ($$): For vacant properties that you may be cosmetically renovating and reselling.
  • Builder’s Risk ($$$): For vacant properties that you plan to do major renovation work.

 

Key # 3 – Name of Insured Must Match How the Property is Titled on the Deed

 

This is the single biggest mistake far too many investors make. Whatever the Deed shows as the title holder MUST be the exact same name of insured on the insurance policy.

 

Key # 4 – Enough Coverage

 

  • Damage: Based on replacement cost and depending on your exact situation, you may choose a different amount than what the replacement cost estimator determines.
  • Lost Rent (for Landlord Policies): Set at the gross rent you expect to collect.
  • Liability: Ask your insurance broker for the proper amount and don’t forget to own your real estate in a limited liability entity.
  • Pets: If your tenants have a pet, make sure you either have pet coverage in your policy (and the pet is not on the vicious list) or the tenant has paid for renter’s insurance and that policy has pet coverage.
  • Flood: Even if you are not in a flood zone, if you are near water, you may want to get flood insurance. Just ask people from Nashville, TN what happened in May 2010. Or people on the East Coast during Hurricane Sandy. Or those in the Carolinas from Hurricane Joaquin. Or most recently, everyone in Hurricane Matthew’s path. Flooding is more common than you think.
  • High Deductible: Consider a higher deductible since you probably won’t file a claim below $5,000 anyways.

 

Key # 5 – Don’t Cheat

 

Insurance companies make money in two ways; (a) Collecting premiums and; (b) NOT paying claims. Don’t give insurance companies anyway to wiggle out of paying out your claim.

Those are the 5 keys to insurance for real estate investments. If you have anything to add to this topic, such as stories of problems or insights you have discovered on insurance, please share your wisdom the comments section below.

Comments

  1. Great video, thanks for putting together!

  2. thanks for this info. This is the kind of knowledge I seek to have in regards to real estate investing. Thanks again. Mike

  3. Wow!
    As always great info. Spot on!
    Thanks for sharing. Thanks for caring.
    NBB

  4. Thank you for this extremely informative video.

  5. Thank you!Great informations!!

  6. Julian Rapaj says:

    Great info…. Thank you for sharing.

  7. As an insurance broker and real estate investor, I insist all tenants have renter’s policy with a minimum of $300,000 in liability in addition to covering all personal property in the unit. Our entity must be named an additional insured so their insurer must defend and settle a third party claim if we are named, as the owner, as a defendant in a claim/suit. We also have the policy add our entity as loss payee so in the event of a property claim, the check is made out to us and the tenant jointly and they need us to sign off. This also gives us the opportunity to file a claim with their insurer if they vandalize or severely damage the unit when vacating. Finally, we have them provide us with a certificate of insurance with attaching endorsements confirming that our entity is protected making sure that the word “endeavor” is replaced with “will” mail notice of cancellation putting the onus on the insurer to notify us if the tenant’s policy is being cancelled for any reason . This puts the onus on the insurer and gives us a legal avenue if the tenant has an uninsured claim due to policy cancellation and the carrier didn’t notify us. If we have a tenant that is chronically behind on insurance, we send a letter to the agent monthly to confirm that coverage is still effective. As far as pets are concerned, we demand proof that the animal has been vaccinated, is licensed and we need a letter from either the agent or the underwriter confirming that the breed or that particular pet is covered. Doing these things can reduce your premium substantially by reducing or limiting your own insurer’s risk.

  8. Chris Islas says:

    I particularly enjoyed the higher deductible section as being on their forever list as a “claim filer” to those who have lower deductible. I also totally agree with you about how Insurance companies make their money..no different than having medical insurance. Who really wants to pay insurance when you are the most healthiest. I didn’t. “Now I don’t want to go off on a rant here” but I was denied insurance insurance because I was 230 pounds and I had the money to do it. Go figure. It’s all a scam. “Of course, this is just my opinion, I could be wrong.”

    Good content, Phil.

    Thanks,

    Chris

  9. Thanks for the info. Phil as always good stuff

  10. FANNY HENAO Q. says:

    Wonderful and helpful information…!!!
    Thanks for sharing.

  11. FANNY HENAO Q. says:

    Helpful information…!!!
    Thanks for sharing.

  12. Nuno PIpa says:

    Hi Phil,

    I have a house under both my girlfriend and my name. Would the insurance policy need to be under both names or is one of our names ok?

  13. Great info, Phil. Thanks.

    Can you put a video together on what marketing strategies you use other than calling fisbos on CL?

    Thanks.
    Dan

  14. Thank You for your free training

  15. Phil You Are The Best!!

  16. Hi Phil,
    My insurance agent said I have to buy flood insurance from fima. All state do not sell it.
    Is that true? How much did you say should one buy to cover only ground floor restoration
    in case of flood?
    Thanks,

  17. Hi Phil,
    I hear different things about putting rentals in LLC if rental has a mortgage on it.
    Can a rental be put under the name of LLC if there is mortgage three years after the purchase? who to inform while
    doing so?
    Thanks,
    Bianca.

    • Phil Pustejovsky says:

      You can. You’ll void the title policy and the lender will have the right to accelerate the loan (although we haven’t ever seen where they do). Also, you’ll need to update your insurance policy.

  18. Vickie Shaw says:

    Again thank you I really love learning from you have a good day God Bless ☆♡ from me vickie shaw

  19. That point about getting flood insurance was so true. Even if you are not in a flood zone, or don’t think it could ever happen in your area, Mother Nature just might prove you wrong in a big way.

    My girlfriend and I had a property in Northern California. Flood insurance is a side policy out here because, well, it’s California and it “never” floods out here. Well, some years back we had a horrible rainy season and it flooded the back unit of this duplex that we rented out. And we are talking 2″-3″ of flooding in an area that “never” floods. Aside from repairs to the back unit itself, we had to install a drainage system to prevent the flooding from happening in the future. All in all, $10k-$15K in repairs/drain installation plus lost rent while this was done. Luckily the family had a place to temporarily stay otherwise we might have been looking at motel costs.

    When we put in the claim to the insurance company, they informed us that flood damage was not covered. None of the repairs, drain installation or lost rental would be covered as it all was the result of the flood damage. So, moral, flood insurance may add to the insurance cost premium, but it just might save one’s pocket book when Mother Nature decides to throw her weight around one random day.

  20. David P. Kushner says:

    Thank you Phil

    Hope that you do not mind that I used this as a learning tool for my Property Management Department. Very valuable information for investing and managing.

    You teach us well!

  21. Gholam Kian says:

    Could you do a video on land trust.

  22. Mr. Phil as always you teach the right way & give real life story of what goes on in real estate. Every video I learn something new & gain knowledge from you. Thanks so much David

  23. I think you are a very kind person….using your own resource & efford to sharing all these info….Thanks Phil!!

  24. Ali Bavafa says:

    Great video Phil. An eye opener. Thank you.

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