Are you sure that your single-families are properly insured if they catch fire last night? Would you be covered if your apartment building was blown off its roof by a spring storm? Is your subject-to exposure protected? It is important to understand what coverage you have before making a claim. While it is nice to save some money to increase your net income, you should be aware of your options and coverage.
ACV vs. Replacement cost:
You need to know the differences between these two options. You should also know what a coinsurance penalty means and how it might affect your units. Every property and every property owner is unique. It is important to understand how each option affects your coverage before you make an informed decision about which option to take on each property. Although ACV is “cheaper,” it could end up costing you more when depreciation applies to a claim.
Limits on Liability
As much liability protection coverage as you can afford. You should have at least $1,000,000 per event. You should have more liability coverage the larger your portfolio. Surprisingly there is usually a minimal premium fee to double your protection. An umbrella policy provides liability coverage that goes beyond the $1,000,000 and $2,000,000 limits. A umbrella policy is more economical if you have more than one type liability exposure.
Other structures and personal property coverage:
You should also protect detached structures such as sheds, garages, or outbuildings from being destroyed. These are usually covered by policies that have limits. Remember to protect the items inside units, such as stoves, refrigerators, and window air conditioner units. These items may be covered by policies that automatically include protection.
Coverage for Ordinances and Laws:
This protects you from additional costs that may arise when your property is “repaired to code”. Most properties are “grandfathered” as the building codes change over time. The governing municipality will inspect any repairs and require them to conform to the current code. Hard-wired smoke detectors, and handicapped access are just two examples. These types of work are usually not covered by your policy without the endorsement of the Ordinance or Law. This is more common for older properties and multi-unit properties.
Loss-of-rents or Business Income Protection:
If your tenants are forced to leave your property because of a covered loss, this policy will provide coverage for you. Some policies provide coverage for a specific time period, such as 12 month. Some policies will require you to purchase an endorsement at certain levels of coverage. This protection is essential for all property owners.
Deductibles:
The deductible you have, the lower your premium. If you own multiple properties, and each of your units is covered under separate policies, your premium will be adjusted accordingly. However, if your policy is referred to as “package” or “blanket”, your deductible typically applies per incident. This can make a significant difference in the case of a local disaster such as a tornado.
Flood, Earthquake, and Water Backup Coverage
These losses are usually excluded from most policies. These coverages can be purchased back via endorsements. You should understand the implications of each coverage, depending on your insurance carrier. This will allow you to make an informed decision about whether or not you need any of these coverages.
Protecting the interests of the Proper Entity To avoid the “due-on sale” clause, it is not worth giving up the necessary protection. The first insured should be the entity that holds the property. The primary beneficiary of policy benefits is the first-named insured. In certain cases, additional insured or loss-payee endorsements might be sufficient. As a rule, you should always be the first-named in an insurance contract.
No matter if the Agent is “captive” or “independent”, you should always work with someone you trust. An Agent who is knowledgeable about our business and will take the time to explain your needs and offer advice, even if they are unable to provide the policy. While we all want to save money, insurance is for protection. Before you buy insurance, make sure you know how it works.
