buy insurance like a pro

I adjusted claims for 2 major property & casualty insurance companies for several years. Settling claims with carriers may be another upcoming topic. That said, today we’ll uncover the 10 key tips landlords need to know to get the most from their insurance purchases.

  1. Buy coverage for the structure and land only. Don’t buy other lines of coverage unless your property is furnished (see below). Renters should purchase their own insurance to cover their property in the event of a catastrophe.
  2. Shop early and often. Select the lowest price carrier. Feel no loyalty and don’t fall for the ‘bundling’ gimmick. If next year’s insurance is higher than this year, this is all the motivation you need.
  3. Find a happy deductible between 250 and 5000. The higher the deductible, the more you become your own insurance company for yourself.
  4. Seek ‘replacement value’ policies. Reject ‘specified peril’ and only buy ‘special-form’.
  5. If you cancel your policy during the middle of the period, you are entitled to a refund for the unused (unearned) portion.
  6. Purchase the policy with one payment. The insurance company profits when you make multiple payments.
  7. Be wary of providing PII (personal information) such as your social security number, your income, or date of birth. This data will be used against you. If the company insists, this is a red flag. Provide them moderately incorrect information.
  8. Generally, hurricane, flooding, and earthquake insurance is not advisable. If there is a major disaster, the US federal government will step in and provide coverage. — The only exception to this is perhaps obtaining a ‘special endorsement or ‘rider” for surface water (for those properties which will likely flood).
  9. If you receive a quote, and then after the purchase, the price suddenly increases, investigate: a. whether the increase is still lower than the competition, and; b. call your insurance agent and demand an explanation. Keep in mind, the explanation for the price increase may be reasonable. If the revised price is higher than your competitors’ quotes: i. send the agent one or more of the aforementioned quotes-ask for a match, ii. inform the agent this appears to be ‘bad faith’ iii. Notify your State’s Department of Insurance commissioner of what happened via snail mail. Await their response. If you decide to cancel, remember step 5.
  10. There is no such thing as ‘full-coverage’. Most policies are surprisingly similar. If you wish to learn more about what each line of coverage means, and how much each is worth, ask your agent or google this subject. Rule of Thumb: Insurance companies desire to up-sell you on unnecessary coverage. Wealthy people generally do not buy/need insurance, so begin with the basic (bare bones) coverage with a reasonable deductible.
  11. Bonus perks for the off-site landlord: Not having to always (ever?) schedule time with a live agent is always a plus, especially if a perfectly-patient AI (artificial intelligence) or convenient 24/7 web interface is available. Exchanging emails and detailed attachments with a live person is 2nd best to a well-designed web/mobile interface. If your insurance company sports features like i. online renewals, ii. online policy management (where you can price a policy before you purchase) iii. text-based claims, bank endorsements changes, pdf printouts, etc. are always a plus. If your agent is not a ‘captive’ agent servicing only one carrier, have them work for your business by seeking lower policies, and explain to your satisfaction about policy differences.

If your properties are leveraged (you have a lender), then it may not be a bad idea to have them inform you, from their perspective, what a good ‘basic’ insurance policy looks like. **Do not ever allow your lender to buy insurance for you and add this cost to the mortgage. It will be much more expensive than any insurance, and will not likely not provide you with even adequate coverage. If your bank has done this already, ask them how to remove this ‘fire insurance’ coverage from your mortgage.

The Home Owners Association (HOA) fees actually pay for a ‘fire policy’ for one of my townhouses. Be sure to ask your HOA for a copy of this policy and keep it for your records.

Leasing a home as furnished requires coverage for your effects. In the United States, cabinets, sinks, tubs, carpeting, tile, appliances, and most lighting fixtures are included as part of the ‘structure’. The structure is known as first-party coverage since you, the insured, are the beneficiary of the policy. The insurance company is known as the second party. Third-party coverage or liability caused by the house is also included: For example, your old rotten tree falls crashing through your neighbor’s fence and breaks his window. However, Baron will write a future article about this in detail.

Baron welcomes any feedback about this, or any other blog.