In this interview, I was amazed about how much information a good insurance broker can find out about a property you are thinking of buying or even future tenants!
Perhaps that deal you are excited about had a major fire, flood or was a victim of riot. These might be hard facts to get out of a seller but a simple call to an insurance broker can steer you clear.
Have a potential tenant applying? Did you know he/she has a habit of punching drywall or setting the kitchen on fire? Do you think they will put that on your application? Should have called the insurance broker first. They could have pulled up all these nasty habits by searching the tenants renter’s insurance claims.
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Cool going to be met with like the old movies. They had a different class. Now what I do this, I, now I understand why they did it so we can single through. All right. Cool. All right. Well, I’m at Riverside insurance here in Fort Collins, Colorado with Jason Julius, to talk about all of our questions that we had in regards to insurance policies for multi-family investments. So welcome guys. Thanks for having us. Thanks for taking the yeah, no problem. All right. So the first question we have is it’s basic. So at what stage in the purchase of a, one of our multifamily investments, does the insurance company get involved? What should we, when do we usually pick up the phone to call you? And more importantly, when should we sure. Yeah.
Yeah. So w when it comes to getting started with the process, what I would always tell you guys to do is as soon as you have dialed in an address that you are interested in, that’s probably the best time to start looping us into the equation. Now, when, when we get that address, we’ll need a couple bits of information from you guys to kind of get some quotes started or some ideas going. Um, but depending on if it’s a triplex, fourplex, single family home, um, we can at least give you some direction, some general overall thoughts, um, and, and really just be able to hone in on probably a couple of carriers that we can look at for you on that. Um, and then as it comes to, you know, going a little bit deeper through the process there, um, once you guys put an offer in and your offers accepted, um, you’ll usually have 30 or 60 days to kind of get your finances in order.
And we’re a part of that. Um, and so that’s when we’ll need to know roof age, everything about the building, we’ll need pictures, inspections, those kinds of things, um, so that we can get all that to our carriers, get that out there, and then get some quotes back for ya, usually on the larger properties. So, you know, 13, 20 unit apartment complexes, things like that. The earlier we get that information, the easier it’s going to be for us, if it’s a single family home or a condo or townhome, you can give that to me six hours in advance of closing, and I can knock that out for you.
Yeah. And I would say too, you know, and this is just, this is true through the whole process, right? The more you guys, the more we communicate about what’s going on with the property, the better, because what we need to weed out on our side is if there’s any eligibility issues. So maybe it doesn’t have a fire suppression system, right. And it’s a 15 unit complex, depending on where that’s located. We may be in a world of challenges with placing the insurance. So the more that we can dive into early and us with all of our commercial clients, that relationship over time becomes it. I mean, like there’s a, in my, in my daily routine, there’s about 10 or 12 accounts that we always work with. We’ve got 500 households or 500 accounts in the agency, but the same 15 people I’m talking to a couple times a month, right.
And that’s across the commercial spectrum because we’re trying to dialogue about what kind of equipment they’re buying properties, they’re purchasing, what’s going on in their business, if they’re hiring employees, those kinds of things. Um, and so for you guys, it’s the same kind of thing as you’re getting involved in a property, or even once we start a policy, right? If something changes, we want to be involved in that dialogue so that you guys aren’t in front of a bus. Um, and so our goal, especially as you’re going through multiple property purchases, we’ll be in constant communication with you guys through those to make sure we’re weeding out any potential challenges that are on the horizon before you guys even get anywhere near closing. So,
Gotcha. I didn’t think about that. And the sprinkler systems a bit more complications with them.
Absolutely. It’s and I would say things like sprinkler systems, um, you got to watch out a little bit for what kind of dog breeds you have in some of those apartment complexes. Cause we do have some dog breed restrictions. Um, age of roof is huge of type of roof type of roof is huge updates to HVHC and electrical. What I’ll tell you is if things are updated and I mean fully updated, like from the studs in so new wiring, new piping throughout the whole building new HPAC units, you know, since if it’s, you know, 1980 and 1990 or newer, usually those policies are pretty golden. You start getting into stuff that was built in the fifties and they haven’t updated wiring and all that kind of stuff. We’re starting to get really limited on, on carriers. And we’re going to start talking about higher premium. So we’re going to be asking you guys questions and it becomes a rhythm cause you guys will know what we’re looking for in advance of it after a few of these, but we’re going to be asking things like, does it have electrical wiring, you know, does is the piping, when was the piping replaced? So we want to get out in front of some of those questions before you guys get into the purchase because that, in some cases that may be a deal breaker as far as whether or not you want to buy the property.
Cause there’s a couple of properties with have wood shake shingles, and haven’t been updated in 40 or 50 years that we get offers to like write their insurance all the time. But by the time that we get a premium back to them, they’re seeing 10, 12, $13,000 a year for that. They, that kind of changes the dynamic on some of it because they’re thinking, Oh yeah, this will be a couple of grand. We’ll be fine. Just like all the rest of them. And then you toss one loophole in the equation like rottweilers or something like that. Everything can just kind of fly off and working like that. So,
And if you get into mixed use commercial, right? So in Colorado, for example, you’re going to have multifamily housing, that’s above a weed dispensary. Those are, those are challenges from an insurance perspective. So depending on what kind of, um, what kind of businesses are occupied in space as well, that can be a problem too. So those are all the kinds of things that we’re going to poke around and help help you guys navigate to make sure that when you guys are going to closing, there aren’t any surprises. And when we go send an inspector out there, cause a lot of our carriers, well, we’re hoping that we’re not going to have a whole bunch of things come back that we need to fix. Right. That’s another part of the process too, for you all. So we’ll navigate those waters with you. If they come back and they say, Hey, we need to repair this window. Or there’s some siding that needs to get painted. Okay, great. You got, we got 60 days to do it. Here’s what we need to do. We’ll help guide you guys through those processes. And we’ll go argue with the underwriters about ticky-tacky stuff versus stuff that really needs to get fixed.
So it can also help with contractors and stuff too. We have good relationships all the way around the front. Yep.
Yeah. Excellent. So that kind of leads into my next question was what are the benefits of bringing you guys in before we sign a contract? And like we were talking about age here in Fort Collins, we have a lot of historical homes. Absolutely. Yeah. You know, I never really considered some policy holders will not insure such, so you’d have to look further. So what would overall, I assume the benefits of calling you guys, even before we signed the purchase contract, because you were talking about the surprise, the $13,000. So what most people are used to of, you know, okay. Now it’s time to call the insurance. You know, you gotta be on the team immediately or as soon as you can.
Yeah. Once you guys start identifying a property that you’re, that you’re serious about, right. Just let you know, just shoot me an email and say, Hey, here’s the address? Here’s and week I can send you guys some kind of basic what’s the age of the roof when you know those kinds of things. We can find some of that stuff on our side too, when it was bill, when remodels were done. Um, but we’ll go, just take an initial pass at it. Cause sometimes I can Google, Google, just Google a property and look at it and say, uh, like there’s there’s problems here. Right? Um, so we, you know, depending on what the, the, the situation is, and oftentimes there’s Zillow listings with interior pictures and stuff like that, we’ll at least give you guys some early thoughts as you’re going into it. That, yeah, this is probably a good, we’re probably not going to have a whole lot of kickback on the insurance front. Here’s some things we’re going to need to know. Maybe send us the inspection when you get it. And then we can start talking to underwriters
And we can also help, like I said, on the contractor piece, we have a lot of good roofing companies that will go out. You know, if you’re taking a look at a property and you don’t necessarily know anything about the roof, we can send a roofer out there with you. We can link you guys up. And so that, you know, when you’re going out there, he can say, this roof is in complete shambles. You’re going to have to replace it in a year. Or this thing looks brand new and has hail resistant shingles. This is a good purchase. And we can do that kind of all along the lines of, you know, everything from electrical, the plumbing,
And these are roofers that we really, really trust to tell us whether or not there’s issues. These aren’t guys that we just kind of pull off the street. There are people that we do a lot of business with and they’ll go out and they’re not, they know that for us. Right? We don’t want them to just file a claim to file a claim. We need an honest assessment of whether or not there’s a claim there. You know? So those are those. Those are the kinds of that. We, we like to use our guys for some of those, it doesn’t matter who you use for the replacement, but we like to get our guys involved because a lot of roofing companies and contractors will tell you, Oh yeah, you need a new roof. Right? So then we file a claim. The insurance company gets out there and goes, you don’t need a new roof.
Well, now we’ve got a zero pay claim on your claims history, which is going to ding you guys, even though it didn’t pay anything out. So the next year when we have to replace the roof, now we’ve got two claims in a two year span. So we’re trying to avoid that kind of stuff and keep you guys, we want to make sure your policies claims happen and that’s okay, but we don’t want dumb claims because that hurts your eligibility for stuff in the future. So we’re not thinking about this. What you, what you will all find with us is you’re, you’re not, we’re not thinking about this as we’re writing this policy and getting you guys to close it, we’re not your realtors, right? We’re going to be with you guys for five or six years, hopefully more. We’re trying to make sure that we’re positioning you guys for that longevity versus write the policy and then move on. So that’s a very different dynamic with insurance that we want to make sure you guys over the long haul are in a good place with the policies, regardless of what the property is.
And as, uh, as it comes to claims, that’s another thing we can kind of help with too. On the front end. A lot of times we can find out the roof age, we can find out if that place has terrible pipes, things like that. Um, just by looking at the client’s history. So if you call us and say, Hey, I want you to look at one 23 main street in Windsor. I can go in, I can do a little brief background on it. And once I put that through all of our carriers, we’ll come up with a claims history based on address as well as name, right? So any claims that you guys file will come up under your name, but I can find it under an address as well. So for example, if you look up one, two, three main street, and we see that there’s like three water losses, more assets a year, something like that, a theft theft comes up a lot, especially if you’re talking about Denver, we can kind of forewarn you on some of these issues. And then you could even ask your inspector, Hey, look, can you look at the plumbing? I’ve heard, there’s been four water plans in the past two years. Hey, what’s the crime statistics around here? Cause it looks like the previous owner had about six theft claims. Those kinds of things can kind of steer you in a direction as to if you want to buy something in Windsor or Fort Collins. I know that’s a bad example, but Denver to Fort Collins,
I’m glad you brought that up. I never thought about that. So like during the whole due diligence period, you guys can look at the past, what’s easier than I could. Then you could make phone calls over and over. Yeah. Wow.
Yup. Yup. And, and that’s, and that, that kind of like Julia said, listen, right? Like you guys can’t necessarily control death, claims, fire claims those things happen, but it’s just like a driving record, right. When you see somebody who has six tickets in the last five years, they’re probably going to get another ticket next year. Right. And so, you know, going into that prepared to pay, I don’t, you know, the deductible might be, you know, five grand or something like that. Well, every time you have a water backup claim here, there’s five grand out door that you got to account
For. So yeah, it is. It’s helpful in that process. And that’s why I tell you, you know, with these kinds of relationships, get us involved early because we can really guide good parts of that, of that process to just put you guys in a good position as you’re looking at properties. Right.
And the other thing that we get knowledge of too, is usually we suggest for any landlord that we’re working with or commercial investment group, we always tell people to make sure that their tenants have renters policies
So we always tell people to have, um, renters policies. We always say that the landlord should be listed as an additional insured, um, and things along those lines, because that gives us more ammo. When we’re looking at the renters policies, obviously we can help write them and we can keep them on file. You can’t mandate that, but we can always help, but we can go back in time and look at all the renters that have been in that facility. We can look at their old insurance claims too. So not only like, say for example, you guys have like a storage unit on one of these properties that you buy and you have to file a theft claim. Great. Well, that’s not going to come up. And if somebody else who’s renting and has a renter’s policy files, a theft claim for something that got stolen out of their car.
So when we type in that address, they’re going to be listed at that address. And so we can even see renters claims that come up for theft things along those lines too. So we can provide a lot of background or no background at all. Either one is going to be super helpful. If we say, Hey, look, this place has never had any claims that we can find. Boom, that’s going to give you a little bit extra peace of mind, as opposed to when I tell you, yeah, there’s been 85 theft claims in the past five years away,
It goes like the FBI. As soon as the information we find, it’s kinda creepy,
It really is. It’s amazing how much is integrated now, as far as like claims history and property background and all that, um, on the renter’s insurance piece, the other part of this is it’s gonna mitigate you guys from some liability exposure and it’s going to help keep your policy out of, out of being the primary policy for everything that happens on the property. So best examples I can give of this. Um, you have a tenant who leaves bacon on the stove and catches the building on fire, right? Their liability insurance is going to take primary there. So if you’ve got $50,000 of damage to the property, that claim is going to get filed on their policy. First payout damage damages, before we even involve your insurance policy, which means you’re not going to have a claim on your policy, right? Same, thing’s true. If you have a tenant who let’s say, let’s say, for example, you guys have a hole in a fence and they have a dog that runs through the whole runs in the street, causes a car accident.
Right? The nice thing about the renter’s insurance is that’s their dog. That’s probably going to start on the liability insurance from them. I could see a situation like that involving both, honestly, but you’re going to mitigate some of that loss because their policy is involved in that from a liability perspective, they are negligent. They caused harm to somebody else, dog wasn’t on a leash, blah, blah, blah, blah, blah. Whereas in that same situation for the fire dog gets out, take away their renter’s insurance. Now your policy is the primary. So yours is the only policy that exists. And when a lawyer gets involved, they’re going to look at what policies exist and that’s where they’re going to try and file claims. So I think it’s really, renter’s insurance policies are cheap. They’re less than $200 a year. We’re talking 15, 20 bucks a month. And like Julia said, we, you guys can require in your lease language that, that you’re listed as an additional insured on the policy, which means that if their policy cancels, you’re going to get notified of the cancellation so that you, so that you can go to them and say, Hey, you’re in violation of the lease.
So that means, you know, that everybody in the building has an active renter’s insurance policy at all at all times. Wow. Okay. Yeah. And I’ll, and I will tell you tons and tons of landlords don’t, don’t require renter’s insurance. It’s a little bit of a pain because they’re trying to keep track of things and they’re having to run down tenants when they stop paying their bills. I get it. But the really well run and property investors and people who are doing this seriously, they’re requiring renter’s insurance because they’re trying to reduce their exposure on, on these properties that they’re holding.
So do you guys look for, like, when you’re working with us as the landlord, would you recommend a minimum policy that the renters have hold?
I would say most people require a hundred thousand in liability as a minimum, which is dirt cheap. We actually,
Yeah, but what I would tell you is to go from a hundred thousand dollars, a liability coverage on a renter’s policy to $500,000 of coverage on, around your policy, four or $5 a year. So, so I would just flat out tell you say 500,000, nobody’s going to balk at it. Any insurance is going to know what you’re doing, so they’re not going to have any qualms about it. It’ll take a, it’ll take a state farm renter’s policy from 150 to $155. So
It’s a little more than that, but it’s like 20 bucks. Like it’s not yeah,
Likely four or five times the amount of coverage for a dollar or two a month. Nobody nobody’s even going to balk at not buying their next pack of dentine ice
To get that kind of coverage. So
I would say go higher on those things just to protect yourself. And the other thing, as it comes to renter’s insurance too, there’s a lot of carriers out there that are now kind of digging deeper into like these rental property policies. And one of the questions that is coming up now is do you do background checks on your, um, clients? Do you do credit checks on your clients? Do you allow them to smoke in the unit? And one of the, one of the, the fourth one is do they require all their chance have renters policies. So one of our carriers, Liberty mutual who owns Safeco, they kind of operate together. Um, they have those five questions listed on every renters app or every landlord policy application. And I’ll tell you the more boxes you check there or whatever your premium goes. Yeah. Cause you’re doing more work. That’s not going to stress out the case.
Yep. So you’re saying if I require half a million dollar renter’s insurance, that’s gonna help my premium. Correct. And theirs is gonna go up by five bucks.
Yup. Yup. Yup. And if you’re, if you’re verifying that they’re not smoking, you’re running background checks on them mean cause all that stuff, right. It’s weeding out potential clients that are going to end up being problems or tenants that ended up being problems. Um, that mitigates like most of your losses on these, on these kinds of policies aren’t coming from anything you guys did, they’re coming from a tenant who, you know, smoking in the house and caught it on fire. Right. You know, they had a dog that bit, the neighbor, like those are the kinds of things that you see in this stuff. So the more that you guys can kind of weed out and find good tenants, which the nice thing around here is you’ve got a rental market that is got a lot more people looking for houses than houses available, super competitive.
It’s competitive. So you guys can kind of be choosy on tenants and I’ll just tell you from experience with, with landlords. Um, I, a lot of landlords we have we’ll even, you know, they’ll take a little lower in rent to get good tenants in there because they know how much easier it is to have them in there. Um, and especially right now with, with, um, you know, with COVID and all the restrictions around booting people, out of houses, having tenants who were paying every month matters a lot. So, um, anyway, that’s just, I would say,
And we can give you a list of all those questions. I was kind of trying out, cause there’s, there’s probably about five or 10 more depending on the carrier that we ended up going to that if you, if you check those boxes, you’re going to save money.
Yeah. Yup. Wow. I think that covers most of our renters insurance stuff. Okay.
Yeah. We covered that. Okay.
Okay. I mean, how, how, when, when should a landlord utilize, utilize the tenants renter’s insurance rather than through the owner’s policy? A lot of that’s dictated by where the claim started and originated. So we’ll, we can help navigate that for you guys. Um, typically speaking, uh, um, we’re going to try and press it onto the tenants policy, no matter what first to mitigate you guys from being involved. And we’re going to advocate for that on our side. Um, but you know, their agent might also be saying, well, this isn’t your problem. That’s where the carriers get together and have to sort out who’s liable there.
And usually what, what you guys will end up being responsible for claiming the lies are, you know, a pipe bursting. A lot of times that’ll come back on you. Um, you know, hail claims when claims anything with the exterior of the unit, those kinds of things, those are all going to fall back on you because you guys are really ensuring the structure for the most part. Now obviously if somebody lights a cigarette, burn something down, somebody turns their AC CR or excuse me, their heat off in the winter. And because they don’t want to pay their bill, there’s a way that frozen pipe can go back on their policy. But that’s where you get that sticky, gray area of, well, the pipe should’ve been better. Oh, well you shouldn’t have turned your AC off insurance carriers by now. We figured it out.
Yeah. You’re seeing a majority of claims there from the actions of the tenant,
I would say. So. I mean, outside of, outside of wind and hand in hand,
No pipes bursting are going to be, I would say 99% of the claims that you are going to experience outside of maybe, um, tenant damage to units. Um, a lot of times you can file a claim for that. A lot of times we would tell you that it might not be worth it to file the claim and to just pay the three or 400 bucks to fix up the unit. Um, that actually happened to my dad. He owns a rental properties in Florida. Um, he had a dirt bag tenant in there that was smoking in the unit and everything like that. Well, by the time that he was going to file the claim, he had like a $5,000 deductible. The damage was like three grand. Those are kind of some of the things that we can help you navigate through. And I would tell you don’t file a claim. You’re not going to get any money out of this, just fix up the unit. So, you know, it’s those kinds of things. Yeah.
In tenant tenant damages, usually it’s weird. Every policy is a little different on this, but oftentimes they’ll have a separate deductible in the underlying policy documents than your regular deductibles. It’s the weirdest, it’s one of the only things that operates like that. But a lot of carriers will basically, they’re basically trying to say, Hey, look, you’re responsible for your tenants. Fix the drywall. Don’t put this on your insurance policy. And I would generally tell you when we’re talking about properties that kind of at this size and, and you know, if you have a $8,000 claim, because there’s some, there’s some damage in the building, I’m probably going to be like, look, you got a $2,500 deductible. You might just want to fix this, save your pops for the big stuff. Right. But for when an ALA yeah.
We’re talking Colorado or Texas save your money for the way on Hale. Yup. Yup. Yup.
Good to know. So you know, now we’re talking about natural disasters. A lot of guys have been talking about Texas. You know, what a mess. I mean, I’ve got a one pilot over there, his entire block, all the pipes burst water, went into the street. Now it’s an ice skating rink. Yup. So in cases when big natural disasters like that. Sure. And you can’t really point the finger at the property or the landlord or the tenants. Sure. How does, how does that work?
So as it comes to claims like a natural disaster and kind of what happened, one of us you’re good. Sorry. No, you’re good. So as, as it comes to kind of like the natural disaster that kind of happened in Texas, most all of those homeowners policies are really going to pick up those claims for the broken pipes and the damage that happened to their home specifically. That’s kind of how that’s always going to function in the fact of, if you had a, if you had rental properties in Texas, which obviously we can help you with, um, you know, those policies are going to be picking up those flames out here. If a tornado comes through and wrecks, all of Windsor, that policy that you guys have is going to cover those flames. Obviously that’s not on the tenants. It’s not really the landlords fault, but that’s what you have.
And the renters policies that your tenants have will pick up their possessions inside the property. So your policy is going to pick up the structural damage and their policy is going to pick up the, their personal property. What I’ll tell you about some stuff like water, for example, if it originates inside the house, so a pipe breaks, that’s going to be covered if it originates outside the house. So flooding, basically it comes into the house. That’s typically an exclusion on most insurance policies. Now in Colorado, we don’t have a huge flood risk. We write flood insurance depending on where people are located. They’re not cheap policies, but they do exist. So, and we do most of ours through private flood markets. Um, rather than like, yeah, the FEMA basically does, uh, an insurance program and in Texas they have a, uh, it’s called [inaudible], it’s a wind product for coastal risk.
The problem with the government back policies is that they take, and you’ll start seeing this with people in Texas. They take forever to pay their claims out and sometimes they never pay their claims out. So Lee try and defer, unless there’s just, it’s just a, basically the houses built into the river. We’re trying to keep it in the private markets because they pay their claims and they’re more efficient. So, and they’re cheaper usually. So, um, anyway, so depending on where you are and if you guys get a lens, if you’re buying something in a flood zone,
Flood insurance will be required from the lender. And we’ll also note too, because when we go to write the policy of what kind of Dana’s and say, Hey, this is in flood zone a, you need to have a flood policy. So we’ll get you a quote on those lines too. Now as just so you guys know, um, a lot of times, depending on how you do your lending, you can run the insurance through the mortgage company. You can do that, or you can pay out of pocket on the side. The one thing that you can not do is flood policies through the mortgage flood policies, just so you know, are always going to be painful for the year. And they’re always going to be a separate thing from the mortgage or the lending mechanism that you guys are using. So just know that when you do find something in a flood zone or when I pop something up and you know, there’s, there’s random flood zones in Greeley, Windsor, Fort Collins, that you would never really think would, this is never going to flood.
It’ll pop in a FEMA flood zone, which means your lender is going to require it. I can kind of steer you away from those two, even if he just sent me an address. One, two, three Mulberry, not in a flood zone. Perfect. Go ahead. And in Texas and other places, you’ll see some of that too. Um, and then the other thing I was going to say is earthquakes can be an exclusion as well. So earthquakes and floods are going to be the two things exclusion wise that you’ll see a lot of times, however, we can write those policies separately elsewhere, or add them on for additional premium. If they’re in an area that is prone to that, or if it’s something that you guys are just flat out concerned with, we have a couple of different people that are just flat out concerned after the floods that happened here seven years ago. Um, that they’re just a little concerned with it. They live in Wellington, is anything probably going to happen? No, but if they want to pay $1,500 a year to ensure that that’s not going to happen, we’re more than happy to do it. But those are the two things that I would tell you to watch out for.
And if you’re doing stuff, you know, because you mentioned you have some folks in Florida and Texas, right? So like we have the ability to write in Texas if we need to. Um, but you get it. You do get into some of that coastal risk. Like I eat, I always tell my family. I told you this, my family is from Louisiana. You get below I 10, right? That’s where you start getting into a lot of restrictions around flooding and around wind. So there are separate products and policies that we can, that can cover that for hurricane risk. And some of those kinds of things, Colorado is very different on that front, our big risk here. And I’m assuming where you guys are buying properties, unless you get into mountain mountain stuff. Um, really for us down here, it’s wind and hail accidental fires. It’s not wildfire in Fort Collins, right? It’s that something, somebody lights a cigarette up and catch the building on fire. Um, all that is kind of standard coverage and the policies we’re going to write for you late Julissa biggest solutions, flooding probably earthquake. Everything else is going to fall somewhere in the policy with the exception of some underlying language, depending on carriers and stuff like that. So,
Okay. Well that leads to a question on the second page. So we were talking about, um, in your history, it sounds like wind and hail is pretty big here, but have you seen anything else as far as, Oh gosh, I wish the landlord had the policy on this because it’s listed in the exclusion. Uh, you mentioned forest fire, I guess, would be the normal exclusion around here that you would have to add onto that. So forest fires are colored. Forest fires are covered. Yep. Oh they are. Yeah.
Yeah. So all the fires happened up in what, what were those called higher high park area, everything up in like SS park, all that stuff. Yeah. That would all be covered on your net, on your normal homeowners or landlord policy. Either one, those are going to be covered. So if your house burned down, you would’ve been completely fine there. But going back to your question, the two things that I’ve seen get sideways and get weird as it comes to any property in general, whether it’s your house land on whatever mold and as fastness
Mold, even in out here.
Yeah. So one of our lawyers actually going through a mold, um, thing where a tenant is trying to Sue the landlord for mold, neither one of the carriers want to pick it up because a lot of times mold isn’t as a flat-out exclusion, or there’s only like five or $10,000 of coverage and a policy for that. So making sure that you guys take care of your properties and are doing like the test, the proper testing when you’re doing the inspections and things like that, if you, if you can find those risks and mitigate them before they come up, you’re going to be better off for it. But mold is probably the one that gets really hairy because on a renter’s policy for the renter, there’s usually no coverage on the landlord policy. I don’t know what the one you’re looking at, but five, 10 grand is usually the like threshold
I’m looking at right now, a, uh, a policy that we have, um, it’s it’s through, um, Berkshire Hathaway, it’s through it’s called their guard program, very stocking standard multifamily property policy. So this is a commercial policy. It’s not a personal line policy in there is their standard coverage. And I don’t know what we have for building coverage here. I think it’s like 1.6 million, something like that. It’s a 10 unit, 10 unit apartment complex. They have $15,000 of coverage. And there is the limit for, uh, for mold wet rot, dry rot and bacteria. So, you know, typically there’s inside limits on that. So that’s the kind of stuff that you really want to dive into on an inspection. Um, the other thing I would, there’s, there’s a couple other things that I would say are worth monitoring. And this is, um, this has come up a couple of times in Denver, more than anywhere else.
So most insurance policies exclude terrorism. It’s a standard exclusion from insurance policies that came about after nine 11, when the towers came down, the president went on TV and said, you know, this is, this was an act of terrorism that immediately avoided every single insurance policy in the, in the towers are almost every insurance policy in the towers because terrorism and acts of war are an exclusion on insurance policies, right on the news. It was crazy. It was a whole thing. And then the next day the president came out and kind of walked back those comments because they realized that there was this huge now loss of property that was carriers could fight to not have covered cause war nuclear explosion, those kinds of things basically are our carriers say, look, that’s the government’s job to stop that kind of stuff. And if they can’t do it, we’re, we’re out of the picture on this anyway, right.
Where this gets tricky is, um, and I I’m sensitive to how we talk about this, but, you know, with some of the stuff that was going on last summer across the country, in terms of writing and major cities and disruptions in, in, in basic services and stuff like that at the time president Trump had declared Antifa terrorist organization, which immediately called into question, do all of these policies now function. And you would say the same thing about what was going on at the Capitol as well. You know, do, do all of these policies still pay out for the damages that were incurred on these buildings. We had binding restrictions in major cities across the country for most of the summer last year,
Portland, Seattle, Denver, for a time, uh, Chicago, Chicago is a bad word.
So, um, so anyway, where our carriers have fallen on it is they are paying the claims and the justification is they’re not able to really prove who did what in a building and whether or not this was actually part of an organized group or just some random person. So they paid all their claims. Um, it is, I will tell you at the, the unrest is a factor in rating at this point, because, because enough has been paid out on it. Um, so it is impacting commercial property rates, particularly in certain zip codes in, in major cities. Um, in fact, I have a client in, um, in Denver who is looked who, who called us and was trying to sell one of their properties because they got their dumpster lit on fire, like five nights in a row. So, you know, again, this is not to comment on anything going on in the world right now, but just to know, from a business perspective, we are heavily involved in that conversation right now, trying to make sure with our carriers that that stance of paying their claims, isn’t going to change. Um, I don’t anticipate it changing, but we’re really trying to keep an eye on that. So, you know, keep an eye on world events, right? And that’s something else to kind of look at as you guys are purchasing properties, what’s been going on around the area, um, for the last year or two, just because who knows what goes on in the next four or five years.
So, and going back real quick to touch on terrorism real quick. When you start going into the commercial lines insurance policies, it’s an option to buy terrorism. I wonder what it is on this. I’m not, I don’t know about that spot policy specifically, but usually when you go on like a regular commercial property, so like somebody who has a warehouse or whatever, usually you can buy terrorism coverage for like a hundred, 150 bucks a year to tack onto the commercial policy. That way, you know, if something’s fashion the buildings again like nine 11, that would then be covered under a terrorism on a personal lines policy. That’s never going to be an option, just so you know. So that might be one of the gaps that you end up having, like some of the times that we can get creative and put some of these properties on personal lines policies. You might not have terrorism coverage on when you go down that road, but we can add it when you do a commercial policy. So
There’s one element to all of this, about, you know, exclusions that I think is worth mentioning. This is a function of the agent you’re working with as much as it is the policy. So a policy is only as good as how it was written. So like Julia said, I, for example, we include water, sewer backup in every, every policy we have. So for sewer line backs have been to the house. There’s some coverage to repair the repair of the property. We, you know, as he mentioned, we were going to have wind and hail coverage in there. We’re going to have ordinance and law coverage in your policy. Meaning that if the building was built, you know, back in the sixties, it burns down now and the codes have changed to rebuild it. Like we see this all the time about roof claims, right? You have to do new drip edge or new gutters.
That’s an additional coverage that not everybody adds onto a policy. It’s just some agents just cut premium and get the policy on their books and that’s that. So they might pay out for your roof, but then you’ve got a $6,000 gap because you had to replace the, the gutters, right? That’s one of those things that I, you know, as far as, um, how policies function, whether it’s us or somebody else you guys want to work with, get to know your agents, talk to them about the coverage, ask them those kinds of questions, because we’re not cutting out that stuff. We’re going to put that stuff in your policy. And yeah, it might cost you four or $500 more a year, but when we’ve got a claim and we will, on one of these policies, we’re going to pick up as much of that claim as we possibly can.
And we’re not going to stick you guys with half of the bill. I know there’s some carriers who’ve changed how their deductibles pay out, like on personal lines policies. I know there’s one in Wyoming that basically it’s 20% of the claim now. So if you have a roof claim and it’s 40 grand, you’re paying 20% of that. That’s a big chunk of change on a claim. So, and that’s a personal line stuff on commercial. You’re getting into a hundred, $200,000 deductibles. That’s real money going out, out the door. So, you know, work, work with an agent that you like, that you can have an honest dialogue with and kind of figure out, because like I said, there are standard exclusions on a policy and then there’s stuff you just choose not to purchase. Cause your agent doesn’t miss mention it to you. And their quote was $400 less than some other guy that you found that may have been writing it with other coverages. So make sure you compare policies, um, because that’s the so much of this is on who you’re working with versus just the policies themselves.
So for example, for Fort Collins, specifically, the city of Fort Collins is a good one last year, my year, two years ago, um, they put out a city code that said, when you replace your roof, because of all the wind and hail damage up here, you have to do it with a class four high-impact, you know, resistant, shameful have to do it. You can’t replace your roof without doing it. So what ended up happening is anybody that didn’t have building ordinance and law coverage on their homeowners policy, they had to pay the difference for whatever the let’s just say, it’s a class two shingle versus a class four shingle. They had to pay the upgrade charge to go to the class for if they didn’t have that coverage on there, we have that coverage on every single policy in our agency because we know things like that.
And we, we want to make sure that you’re not footing a bill for $600. When you already paid your $2,500, you thought you were good. Then you have to go back to your investors and say, Oh no, I actually need another 600 bucks to upgrade the shingles. So we, we put those on there so that, you know, things like that, don’t randomly pop up. Now there always be times that something can come out of the blue from anywhere, but we try and put as much. We try and pack the policies with coverage. That’s relevant to make sure that claim time you guys are covered. Sometimes our policies might be three, four or $500 more a year than somebody else. But if you go line item by line item, I guarantee you, we have,
What was that coverage called?
Building ordinance and law. It could be depending on who you talk to, it could be, um, law coverage, code coverage.
Yeah. There’s a couple of different ways to phrase it. If
You you’re building betterments, I’ve seen that.
Yup. Yup. There’s a cup there and there’s other stuff like that, right? That, you know, water, sewer backups, one that very typically isn’t, isn’t included on commercial policies. I don’t know why. Cause it’s not expensive. Um, it’s just those kinds of things that like, you really want to sit down and just kind of go through the policy and make sure, okay, Hey, this is covered, right. Or this isn’t covered or what’s this coverage and how much you know, that we want to, we want to help navigate you guys through that process. Because to be honest with you, I mean, we pay insurance too, right? Like we, we own the building here. Like we’re this is, we deal with this stuff all the time, just for ourselves. I know what I don’t want to pay for. And I know what I do want to pay for.
And I’m like, Hey, like, you know, this is, this is not, do I want to pay $300 a year for this? Maybe, maybe not, but let’s have the conversation make a choice, right? That way. We’re all on the same page. Before, rather than me presenting you a policy to undercut some other agent by 400 bucks, we’re probably going to undercut that agent anyway, because we’ve got more carriers and we’ve already, we’ve already done that work. I’m just not going to undercut them by as much, because I’m going to say, Hey, these are the four things that I think you really need to consider on this. Oh, by the way, you probably need a little more building coverage. Then they’re giving you in here. Oh, by the way, we have water, sewer backup. That’s our goal is to not put you guys in front of a bus.
Um, if there is a claim, she has a good, we try to be, I don’t know if we’re good. I just, I mean, insurance agents are a dime, a dozen. There’s a million guys doing insurance. Not everybody has experience in it. Not everybody knows what their, what their, what their markets are. And Julia and I really do try and make an effort. The reason Carol referred you to us, all of our business comes from referrals. I mean, we don’t do any marketing. We don’t even hardly network at this point. I mean, our business comes from referral partners who know what we do and know how we operate. And I told you earlier, we have a niche market. We not a niche market, but we work with, we work with kind of people who are a little more serious, right? I’m not going to people who just want to just want the cheapest policy imaginable are not gonna like to work with us because that’s not the kind of policy we write. We’re not Geico. We’re
Not lawyers. We’re not stripping out like uninsured motorist coverage. Med-pay yeah, because a we’re doing a disservice to our clients. The last conversation I want to have is you call me one day and say, Oh no, that’s not covered. Yeah. It may very well happen that something weird happens sometime, but I’m much more willing to have a one-off random conversation like that, whereas opposed to it happening every other month, because I strip out water, sewer backup during the winter. Like, I don’t want to have that conversation. I’m honest to a fault, like beyond honest to a fault, it’s annoying, but I’d much rather just tell you, Hey, look, don’t buy this property. Or Hey, this guy has policy that you brought me is actually a better policy. Go with that policy. I’ll tell you that all.
Yeah. And to that point, if we’re looking at two policies and our competitors better than ours, we’re going to tell you that too. Like I like our, we have, we do have some clients who have one policy with us, one policy with somebody else. And that’s part of the process. And, and every now and then they’ll switch, right? Like that policy will leave and that one will end up coming over because of whatever reason. Um, like I mentioned this earlier, our goal is longevity. We want to maintain a relationship with you guys for 15 years, not three. Um, and so, you know, for us, we’re, we’re gonna, we’re going to position you guys as well as we possibly can. And we don’t want to have a bunch of uncom, uncomfortable conversations with you guys about why stuff’s not getting covered. Why adjusters aren’t getting back to you on time, all those things. We’re, we’re trying to build a real relationship with you guys on a deep one, not one that’s just based on premium. So that’s always our goal and we are cognizant of price that is we’re shopping based on price, but there’s underlying stuff beyond that, especially when you’re getting into commercial, that is so much more important than just the cost. So, yeah.
So, um, let’s say we close on the property right now. The insurance is engaged. Do you guys recommend, they recommend like any documentation, photos, videos, or anything as when it’s still fresh? So when something does happen, either the tenants fault, natural accident, whatnot, what kind of documentation do you guys recommend?
So what I would kind of tell you to do is almost exactly kind of what you just said, right? So when you buy your property, I would make sure that, you know, just for your own records, take pictures of the outside, take pictures of anything that you think might be unique or different about the property. So say you have like masonry veneer across one side of it, but maybe not the other side, take pictures of those kinds of things. Um, make sure you go into the units. Obviously you’re going to be inspecting all those anyway, but make sure you have the inspections, take pictures of the units, those kinds of things. If you have that, that’s just going to make claim time, a whole heck of a lot easier, um, documentation, anything that you can get from the previous owner of the unit or the building, I would try and grab as much of that as you can, whether that’s old claim history, depending who you’re buying it from, a lot of people will give you a lot of information if you just ask.
So if you can grab whole claim information, a lot of people even say, Hey, I’m actually insured with Berkshire Hathaway. You should go with that policy. Right? So like a lot of times those buyers were, we’ll kind of steer you in the right direction, especially if they know that they have something weird. I know you mentioned it earlier, historical homes. So we actually have, there’s only one carrier in the state that really writes historical homes, travelers. They will take it. There’s some exclusions to it, but if you can go on a travelers policy for a historical home, you’re paying two, $3,000 a year for your coverage, right? The only other option is what chase said earlier, excess and surplus. Then you’re talking five, six, seven grand. Some of the exclusions are, you can have tours going through your house, um, and a couple other unique ones, but, um, any documentation that you can get from the previous owner and just talking to them and having a conversation with them is going to help you. And a lot of times they’ll forewarn you of issues that they have with them.
And here’s the other thing most of these properties are going to get automatically inspected by our carriers. We have no control over that process and they don’t tell us they’re doing it. And there’s a reason for it. They want to audit agents. It’s a, it’s a, it’s a, it’s a backup for the carrier. That’s independent of us as the person who wrote the policy. They’ll go, they’ll get ahold of you usually before they do it, unless they’re just doing like a road inspection. Um, but they’ll come and they’ll take pictures and they’ll identify different parts of the, the property. And then they’ll send us a risk report basically. So we, we, we do have situations, right where an inspection comes back. Usually we can get out in front of this on a, uh, on a new purchase, especially, um, because usually the building’s in pretty good shape when they’re going to sell it.
Um, sometimes when we’re changing carriers, right? And it’s, building’s been in the same carrier for seven years and nobody’s done any repairs to the property. They’ll come out, they’ll take pictures and they’ll say, Hey, we need you to paint the siding, paint the siding or whatever. Right. And we’ll get this report and they’ll give us 30, 60 days. Sometimes they’ll give us a full year to make the, make the required repairs, but they will threaten cancellation if you don’t do it. Right. So that’s where you call me and say, Hey, I got this inspection. What do we need to do? I call the underwriter. And I say, Hey, what is all this stuff? Sometimes it’s as simple as well. We noticed there was a shovel sitting on the back, leaned up against the side of the house and we don’t want a kid to trip and fall on it.
Okay. We’re going to go move the shovel and take a picture of it and send it to you. Right? But sometimes it really is actual repairs that we have to get into. And usually it’s not super expensive because we we’ve gotten we’ve figured out the big ones. It’s mostly like throw some paint on the wall, right? These are things that help improve the building. They’re going to mitigate claims. They’re going to keep damage from getting worse, but we’re there to help kind of through that process, it can be a pain. I we’re long-winded um, they, they can, they can be a little
Bit of a pain, but it positions your policy better going forward. Because now the carrier knows that the house is where it should be the properties where it should be for the long haul and the policy. So,
So those are your two, the more that you’re willing to work to appease carriers, they will take note of that. They’ll see in your records that, you know, yeah, you went over and painted this one, you know, you didn’t necessarily have to those kinds of things and keeping those records of what you’re doing to maintain the property are only going to be more backup that we can use if somebody is trying to fight, not paying a claim. Right? So, you know, say you just, you just painted the whole, the whole new place, or you just put brand new shingles on it, new gutters on it. If you keep those records, we can just basically go to the claims wrapping site. Here’s all this guy’s records. He takes care of his property. Let’s get this done. Right? So the more documented be a packer at that, like it’s obnoxious, it’s annoying get like some sort of documentation or file server that you guys can all just kind of keep information on all the properties on log it, make sure it’s specific to each building that you have.
And you’re going to end up being not only from our side, but just for getting this started and everything you’re going to make everybody else a whole lot happier. You can say, Oh yeah, the electrical was replaced in 2016. The roof was 2018. Cause what, what will happen is whether you go with us or somebody else, if you switch one day and you want to take all your policies from us to Joe down the street, because there was a fight or something like that, whatever you’re going to need, all that information to give to the next person. So the more detailed you can be Excel is our best friend. We have some clients that will literally just send us an Excel sheet and say, here’s all of our property stuff. Go me. If you can get to that point, you’re going to make every insurance agent that you ever talked to. You happy. You’re going to make claims people happy, and you’re going to keep all the investors happy. So be a background music sell.
Yup, yup. Yup. I get this a lot. Um, if we have a contractor working on the property, slips off the roof falls, how is that covered?
Yeah. So this is a, this is a great question. So, um, it depends on the context of the situation. So there’s think about it. I always kind of tell people to think about it like this, are you at fault or are they at fault? Right? So if you have people doing work on the property, and this is a deeper conversation we can have, if we write a policy and then you guys are having contractors come out. So call me when something like that’s going on and I can kind of walk you through what I would like to have your contractor send you. But the biggest thing is I want the contractor to be insured and I want them specifically to be insured for workers, workers, compensation. So this is particularly acute, okay. This particularly acute for roofing. So roofing contractors like to do this thing where a company.
So let’s say it’s Jason, Julius has roofing company. They have a general liability policy and we have a workers’ compensation policy. Then they hire the guys who were actually going on the roof to do the work as subcontractors. And then they say, Hey, you need to have a workers’ compensation policy as a subcontractor. And they go, okay, sure. So now Joe shows Schmoe’s roofing has a workers’ compensation policy. And then all 12 of the guys who were on that roof, they make them independent contractors and say, and pay them as independent contractors. But those guys as individuals don’t have a worker’s comp policy. So I had seen situations where somebody has fallen off of a roof and it ended up back on the homeowner’s policy for life, from a liability perspective. So reputable roofing companies and contractors matter. And what I’ll tell you to do is request evidence of insurance from them and a certificate of insurance, naming you guys, or the LLC, whatever it is as an additional insured, to make sure that they have proper coverage before they go do the work.
Because yes, if somebody trips and falls falls off, the roof gets hurt. We want that on their policy. If they do, if they cause damage to the property while they’re working on it and catch it on fire, we want their general liability to pick it up, not your building policy, because they were at fault. They don’t have that coverage and we’re automatically onto your policy. So this is a good statement for anybody having any work done to anything in their lives, require certificates of insurance, to verify that they have insurance to do what they’re doing, because it will save you a whole bunch of headaches if something ever goes sideways. Um, so that’s a process we can talk about as you guys are having people come and work on the properties and stuff like that, and you can have them send you the evidence of insurance and you can send it to me and I can look at it and say, okay, yeah, I think these guys are good to go.
So, and, and as it comes to having work done on your buildings, specifically, if you’re doing a renovation or if you’re doing any sort of call it load bearing wall movement, or even if you’re just doing kind of a cosmetic fix and flip kind of deal where you’re going in and you’re replacing all of X, Y, Z, right. Call your insurance agent and ask for a builder’s risk policy. So a first of all, when you go and tell us that, you know, you’re going to go do X, Y, Z, work on this bill personally, you’re talking about if I personally did the work. No, no, no. Well, a, if you personally do the work, or if you hire a contractor, I would tell you guys to look at getting a builder’s risk policy, because a and your policies that you’re going to have on the building with whoever there might be exclusions in there for renovation renovations.
So anytime that you’re thinking about doing renovations, just call your insurance agent and ask about it. But builder’s risk policy. Specifically, what they do is they will cover the structure and they will cover whatever building materials that you’re having brought onto the property, whether it’s siding, whether it’s flooring, they’ll cover like stoves, ovens, those kinds of things. Because if those get stolen, you know, say, say you’re buying like an older property with no tenants in it right now. And you’re going to go in and make a whole bunch of improvements to it. You want coverage for that stuff, and that’s not going to be on a regular policy. So anytime that you guys are going to be doing renovations or anything like that, just call your insurance agent and see, because some policies will have some coverage. Some policies will have a lot of coverage. Some might not have any, depending on what policy you’re in. And then we can supplement that with a builder’s risk policy. So that if something does happen, whether you guys are doing the work or whether a contractor is doing the work, there’ll be coverage in there for it. Now, the other thing that you can do too, is depending on who the contractor is, tell them that you’re not going to do the work with them if they don’t have a builder’s risk policy.
Gotcha. So the insurance sees a major renovation different than if I have electrician come in and do it. Yep. Yep.
If you just have like regular maintenance guy come over to, you know, flip out a faucet or something, not a big deal. Right. What we’re talking about is anything that moves load bearing walls, um, and anything that you would think is a major renovation, you know, completely tearing down all the dry wall, putting all new appliances and redoing all the countertops. I would consider that major ish. Yeah.
Remodeling versus maintenance. You know, that, that kind of thing. That’s, that’s the way I would say it. If you’re doing a remodel, talk to us and we’ll figure out what we need to do,
They keep you guys on speed dial. You will, you will.
Like I said, I have on a, and we both have this, right. Our, our commercial accounts and the things that these kinds of broader policies, it’s an everyday thing. I mean, it’s everyday we’re working with some of them on something. And that’s our goal is to make sure, um, that, that you guys are on track and where you need to be in your policies. And we have some backend support over in Greeley that helps us with some of the policy changes and stuff like that. So just Julius and I do and all that. Um, but yeah, we’re, we’re here to, to, to keep you guys going and on track and make sure you’re not in front of a bus as you’re getting into some of these things. So yeah,
That leads me to the next question kind of has to do with what happened in Texas, the loss of rent coverage, you know, in Texas, I know a lot of landlords, they had to pay for a hotel room for their tenants because now their place is uninhabitable while the pipes burst and major renovations, is that a separate coverage? And what does loss of rent coverage entail? How does that work?
It can be a separate coverage. So this kind of goes back to our earlier conversation about pick your agent, right? Um, because you can take this out of policies and does, uh, it does save some, some premium. We don’t, this is something we include in our policies. Typically I’m trying to figure out what this one has on it. Um, uh, usually it’s 12 months or 24 months actual loss sustained. So if the building burns up and you have to put four people in a hotel for 12 months, we’re going to pay that up to whatever the time limit is, or if there’s a, if there’s a fixed limit. So if, if somebody tells me their average rents on a building are $250,000 a year, usually I’m trying to have $250,000 of loss of rent coverage for that year, or both loss of rent coverage. And then also like coverage for the folks to, to be put up somewhere else. Cause those are two different things, right? You’re now potentially not collecting rent on the property. So we want to make sure that we’re taking care of that for you guys, because you’re losing your rent, but you still got a mortgage on it, um, or a loan on it. And, uh, and we’re trying to make sure they have a place to stay.
Renters policies will pick up in some of those instances to Texas. Obviously it could be, it’s a little different depending on what happened. Um, but if a tenant’s at fault for something and the property burns down or whatever yeah. They need to have that coverage on theirs as well, which is usually called loss of use on a renter’s policy. And so that will pick up 12, 24 months or usually like $20,000, something like that for them to go find another place for them as well.
So curious, I mean, this sounds like covers that most people would deny
A lot of times it’s actually built in, Oh, it’s Danica. Oh, okay. So, so on the commercial policies that we write and on the policies that we’ll write, even on the personal lines side for you as the building owner, a lot of times those are built in coverages. And I know it’s part, I know it’s in that policy, it’s part of their standard package. Um, a lot of times it’s also built into renter’s policy. So like when I go in and write a renter’s policy, 150 200 bucks a year, they’re probably getting it. It’s like 10, 15, 20,000 is usually like the baseline coverage for loss of use, which for 90% of things that are ever going to happen, that’s going to pick up the majority of them either going to live in a hotel or apartment or whatever, while your place gets rebuilt for X, Y, Z, or while their unit gets redone because they burnt up half of the unit. So those are, those are actually pretty stock and standard. And usually you have to go into exclude it to save money, especially on the commercial side.
Yeah. Like on this one, it’s, it’s defined as business income and extra expense and it’s actual loss sustained up to 12 months.
Wow. Yeah. So
It’s broad coverage it’s designed to, to, to pick up this event for exactly what you’re talking and the reason
It’s kind of a stock and standard coverage is because they don’t pay it out much like on a renter’s policy, more of your stuff is going to come from like a theft claim, as opposed to you burned down your unit, we need to go put you up somewhere else. That’s the rarity of that happening is why they include that coverage a lot of times, because it’s not as nearly as frequent and as a building owner on your policy. So like the actual loss sustained for 12 months. Yeah. You might lose 12 months of rent if the place burns down because of electrical fire or something like that. But at that point they’re already paying $1.3 million to rebuild your 10 Plex to them. What’s another hundred thousand dollars of rent. Like you’re already paying your five, six, $7,000 for your policy. They’re paying a million dollar claim. Right.
Right. We’re not going to fight over the little stuff on that. Yeah. Yeah. So, wow. I want to bring this one up cause it’s pretty popular. So I’ve got a few single family properties in Florida chairman I’m doing short-term rentals. Can you explain the difference between a regular tenant policy, like a renter’s policy versus a short term? Sure, sure. Yeah. So, so like a Airbnb type thing. Yeah. Yeah. So, um, yeah, honestly, on our side, it’s really not that complicated anymore. Most of our carriers just offer an endorsement. It’s a little bit of money because there’s a little more liability when you have people in and out of there. Um, and there’s a little more risk when you have people in and out of there. Obviously people who are living in a house permanently versus people on vacation might behave a little bit differently. So, um, it really comes down to it’s. It’s very simple on our side, the policy itself functions almost identically. There’s just an endorsement that we add on for the short-term rental piece. Um, so it’s a very, very simple policy at this point. Most of our carriers offer the endorsement at this point. Um yep. So really not complicated. Just something we want to know about when you’re doing it. So
The one caveat I’ll put to that kind of goes to a different problem that we see in commercial insurance is occupancy. So when you start talking about like some of these larger properties, usually if you’re going over like 20 units and those kinds of things, if you don’t have a certain amount of occupancy in there, full-time, that’s when you could get that’s when we might have a problem finding you a policy from jump street here, right? So say you just go buy a 20 unit complex up in SS park or something like that, a destination town, right. And you want to do all Airbnb. That could be a problem finding you a policy, or you’re going to end up paying more money for that policy. Whereas if you have 60%, I think it’s 50 or 60%, 50, 60 summer, 80% permanent occupancy, then you’re fine. And you’re in a regular market. Whereas if you’re doing a hundred percent Airbnb, it’s different. So just one thing to be aware of when you’re formulating these plans, when you say, Ooh, I liked that property. That would be awesome. It’s in Galveston. You know, this is going to be sick for Airbnb. Just know that if you’re going to do that, you’re also going to be paying a little more right back.
We got, we got other things we got to figure out. And that gets to that conversation earlier, when you’re looking at a property right out of the gate, let us know we’re buying it and this is what we’re doing in it. Right. And then we were on that conversation from the beginning. So it’s not a surprise when we you’re a month before closing and we’re going, Hey man, like we don’t have an option for this because of X, Y, and Z. I don’t know what to tell you. Right? Like we can get that early on.
That’s what we have to go to excess and surplus markets. And you take your regular standard carrier package from a travelers or a nationwide to Genesee insurance. And then you’re going to be paying $10,000 as opposed to five.
So let’s, let’s talk about that. Cause there’s this question on here, how policies change when going from one to four units over five units, because I think this is a perfect, perfect segue to that. So one to four units, we can insure them a number of different ways. It depends on the property type. So if, you know, if it’s a four unit apartment, but it’s got retail shopping below it, that’s probably a commercial policy. Um, you know, but if it’s a, um, if it’s a true like duplex fourplex, we’re probably in a personal lines policy, unless there’s something really weird going on. Um, so one to four keeps us kind of on the personal line side, Julia’s talked about this earlier, lower deductibles, lower premium, broad coverage, maybe a little lower on the liability, uh, offerings, but we can pick that up somewhere
Else we can get into at least a million dollars.
Yeah. Yeah. And so that’s a, that’s basically very similar to all of your standard homeowner’s policies, acceptance for a rental property. Okay. You go over five units, we’re definitely into commercial, meaning we’re now on a true commercial form apartment complex or, or, um, condo complex policy. Okay. What happens when you get to that point is typically higher deductibles for when inhale. Um, you do have more liability coverage. There are some restrictions on underlying coverage that there are differences in underlying coverage between personal lines and commercial. We were talking about terrorism earlier, some of those kinds of things, but generally speaking, they’re covering the building in a similar way, probably a little higher premium. Um, but not, not like insanely higher, right? It goes from,
Well, it depends, right? It depends. I mean, on, on the Carol ones that we were talking about, you know, that can go from five or six grand to 10 or 12 grand when you go from personal lines to commercial lines, just because of the price. And then the other difference there too is you’re when hailed, well, at least specifically in Colorado, other places can be different, but you’ll go from having like 1,020 500, $5 deductible to like a one or a 2% deductible and what that one or 2% is referring to is the dwelling or the building coverage. So say for example, you buy a million dollar property. Your deductible is 1% of a million dollars. So you’re talking about $10,000, a hundred thousand dollars depending. And some of these policies when you get into larger complexes, they’ll have a minimum of in Colorado 5%. That’s when you start running into, Oh dear God, I need to keep a bank account on the side. So that when the golf ball size hail comes through the Cheyenne mountain zoo and torches the entire complex.
Yeah. Yeah. So there’s 50 grand that has to go out the door to even get the claim started. Right. So that’s just a shift in all of it. Now that what we’re talking about right now is standard lines, commercial policies. Okay. And what I mean by standard lines is this is an admitted carrier in the state of Colorado. They have certain requirements from the department of insurance and things that they have to cover. So insurance companies can’t just write a policy and say, no, no, no, no, no. Right. They, they have to provide some coverages or they have to provide you the option to have some coverages. So I kind of describe it to people like this standard insurance company or a standard insurance policies cover everything, but, and then they have exclusions that are, you know, listed, literally listed out and specific things that they’re not going to cover.
That’s why when you get 150 pages of insurance documents, there’s these things that they’re not going to cover. And it’s the things we’ve been talking about today. They’ll talk about earthquake. They’ll talk about all the provisions in the policy, all the junk in there, but generally speaking, it’s an outward facing policy with things that they’re not going to pick up excess and surplus is a, we’re going to cover this, this, this, this, and this. And then everything else is not covered. So two things with excess and surplus one, it’s not admitted by the state. So they have much more flexibility in screwing around with claims and dragging claims out. There are good excess and surplus carriers that pay their claims and we know who they are, but it is a more narrow policy. And you have to be really, really careful with who you’re working with on excess and surplus.
So Julius and I are pretty good at this. We have a guy in our Greeley office, who’s a 40 year insurance agent that underwrites our excess and surplus policies. In addition to us to verify that he’s like a lawyer, right? He’ll go through all the policy provisions and then hit me with a 20 question email of, do we need to worry about this? Do we need to worry about that? I’ll blah, blah, blah, to make sure that when we’re in ENS, there isn’t an exposure that we’re forgetting about because it just flat won’t be covered.
And the thing with that is 99% of the time, we will try and keep you with a personal or excuse me, a standard admitted carrier, like nationwide travelers, Liberty mutual, Berkshire Hathaway. We will try and keep you there. If you find a weird property. Yeah. We might be
Have to go to ENS. You know, you’re talking wood, shake, shingles, something, you know, super high wildfire risk, right. They’ll still care. They’ll still cover the loss, but those are kind of things that you’re going to have to look out for.
Yeah. And it’s not, you know, you don’t have to
Scared of excess and surplus. It’s just not the best option imaginable. If we, if we, if we have to go there, we will, a lot of policies around here. A lot of the bars and restaurants you go to are on excess and surplus policies. It’s not uncommon to use it as best as competent. Yeah. That’s excellent. Roofers. Yeah.
A lot of those are access and circles. So it’s nothing to be afraid of. Just know that the stranger of a rescue you get bring to us, the more you get away from your standard insurance carriers. And that’s when you have to go down that road. And then you’re kind of going to the wild West a little bit with, I don’t know what premium I’m going to come back with. I might hit you with, yeah, we can do it. This is the only carrier that we can find that can do it, but here’s your 10% wind Hill deductible. Right. So just be aware that if the stranger you get the stranger.
Yeah. Yeah. It’s like a date, right?
Yeah. Awesome guys. Well, thanks so much for your help today, man. I learned a lot. I got to keep you guys on speed. Dial a lot. Like we were talking about having contractors on the roof. I never thought about calling you first to vet them, their insurance. Yeah. So that’s huge. So, uh, guys, if anybody wants to get in contact with you, whether in Colorado at any other place, you have to do that.
So if you want to call our main, our main line, that’s usually the easiest way to get ahold of us. It’s (970) 999-0101. Don’t be afraid to call us. It all rings through to our cell phones too. Um, so if you guys ever have an emergency or just a random insurance question, I’m more than happy to answer it for you. Um, or you can reach us by email. We’ll give that email
And gift cards. Yeah. We can give cards just because our emails are long they’re long winded. Um, I’ll put that on. Yeah, for sure. Um, and yeah, and obviously like, as, as we, as you guys start looking at properties or as we start playing around with stuff, just keep us in the loop on things. That’s why we’re here. I, you know, I’ve said it probably four times today, we want to be involved and engaged in that process. We’re hands-on with it. And that’s our goal is to make sure that you guys are positioned as you’re going into the purchase. And then also as you guys are renting the places out and all the stuff that comes up going forward, so we’re here to help. And like Julia said, if you guys have other questions, random stuff that kept popped into your brain as you’re going through this, you can, you’re welcome to email us, call us. We’re happy to walk you guys through all that. Sorry.
Yeah, yeah, yeah, yeah. We don’t have a retainer. Right.
Awesome guys. This was a huge education for everybody. So thanks for taking the time.
Congratulations. You guys are, that’s a good thing you guys are doing. We’re here to help. Right.
Awesome. Great. Thanks guys. Thank you.