Insurance at a glance, does it exist? Yes it does it’s called the declarations page. What is most important about the declarations page? Well there are 6 things to check.
Rental Property Insurance Declarations Page – The quick and dirty
6 things to check on your declarations page
When looking at an insurance policy a great place to start is the declarations page because it’s usually what’s at the top of the stack of papers you will get. It is the one that you need to review most carefully. Why? Because it tells you VERY important things such as:
- Who is insured – You, your wife, your LLC, your corporation, “who.” This is who will get paid. This is who will be covered. Make sure this is right.
- What is insured – This will be the “location.” Does this match the address of your rental property? If not, you are opening a crack, and your property may not be insured.
- Then it will break down the coverage parts of the policy, and explain HOW MUCH. So it might say: Coverage A – $100,000. Is that the value of the property? It’s an important question. This is the maximum that you will be paid. So make sure you understand it.
- Then it will explain the deductible. Two thoughts here. Can you afford this deductible? Do you keep this cash on hand? What’s the relationship between your deposit and your deductible? If you don’t keep cash on hand, you should consider having your deductible equal you deposit.
- Next, it will explain how the home will be fixed, or the loss settlement provision. Kind of important. What will the company pay you. This is an important concept. Don’t get a great deal on an ACV policy only to feel the pain and what replacement cost once you have had a claim.
- Finally it might list any applicable endorsements. Understand what these are. Endorsements change the coverage. It could be that the endorsements are providing you awesome coverage… it could also be that they are taking away something really important.
Riveting… I know, but this is what drives all else in the policy. If you have a loss, it’s the first thing the adjuster will review. “This policy covered the home at 123 Happy Street in Pleasantville. Is the house that burned, at that address? Yes? This policy covers the house for $100,000, and that is the most we will pay.” Everything starts at the declarations page; it drives the policy. If you do nothing else review it, and make sure the declarations page is correct.
Start your quote online now, and you can have a Rental Property Insurance Declarations page in your hand in no time.
The mission of Gila Insurance Group LLC when it comes to investors is to be the insurance team member of choice for real estate investors that invest in single family homes as rental properties or seasonal homes, to educate real estate investors on how to protect their investments and cash flow properly in order to avoid catastrophic effects on their business and investments, to protect these investments with the best insurance coverage available, while offering value as defined by quality coverage and affordable prices, to act in the best interest our clients by being honest, accountable, and service oriented, and most importantly to have fun and creating lasting friendships while helping people be Covered Investors!
Why start with our Mission Statement? Partly because we feel it explains why we exist and what we are passionate about. Real estate is one of the single greatest investments known to man providing an amazing mix of asset appreciation with consistent return on investment through monthly cash flow. Many of us have stumbled into real estate investment and have become landlords by accident, others of us are investors; the difference is purpose and education. While we don’t claim nor desire to be the place for information on real estate investment, we do aspire to educate investors and landlords alike on the risks that they face as real estate investors and how to best protect their assets and cash flow. Many times this is through insurance, although there are some risks that are uninsurable and the best risk mitigation method is through education. Regardless having an insurance professional as a part of your investment team is invaluable to ensure you don’t lose your investment.
For those risks that are insurable we strive to provide the best insurance value by representing multiple insurance companies to ensure you get the best coverage at the best price possible. We only represent insurance companies that carry an A-rating with an independent auditor such as A.M. Best Company so as to make sure our partners are financially able to keep their promise to you.
While we would love to tell you that everything will always go off without a hitch, we live in a real world where stuff happens. But we are committed to being honest in all situations, accountable for our actions in our dealings with you, and we will be service orientated. You matter, let us show you.
Finally we’re not robots, we like people, we know if we trudge into work it shows. We do work that matters, we protect your investment, we enjoy it and it’s always more enjoyable with we can work with friends.
Successful real estate investors understand the concept of Rinse and Repeat. That is, finding a real estate investing method that works for them, implementing it successfully, and doing it again and again–increasing cash flow and building a legitimate business. For those of us that believe the buy and hold rental model is best and hold 10 or more rentals, insurance can flat out be a pain in the butt. Multiple policies, managing renewals, is just not a great way to spend time when you have a business to run. Imagine a SINGLE policy with all your properties listed, ONE payment, ONE renewal, less paperwork, fewer headaches and better prices on insurance. That’s the 10+ program. It has great coverage options including coverage for:
- Your home and other structure
- Your business personal property such as appliances and other landlord furnishings
- Business Income that protects the loss of your rents if you have a covered loss
- Liability and Medical Payments
- Service Line Coverage (protection for the utility lines that run to the house)
- Breakdown Coverage Option (Coverage that can help replace a broken furnace or repair a washing machine)
- Flexible deductible options for high cash flowing investment businesses
The program is designed for single to six family dwellings that have no more than two stories. While the bulk of the properties need to be these one to six family dwellings, we can also include condos, manufactured homes, and vacant dwellings (for that occasional fix and flip investment) as long as they are not vacant for 24 months. It is easy to see why investors with multiple properties choose to go with this program. It saves money, increasing your cash flow. It saves time, by eliminating paperwork, and provides great protection for your investments! Start simplifying your insurance life with our 10+ program. To get a quote call us to start the process at 1-877-784-8767 today!
When many investors look at insurance, they simply see it as an expense item, something to drive down cash flow. While we are all looking to maximize cash flow, insurance protects the cash flow that can be obtained during the time you hold the investment.
The first thing insurance protects is the house itself, the dwelling as it is often referred. What is covered? The truth is that it varies based on what you buy. In short there are several levels of coverage. The most commonly purchased coverage for rental investment properties is the DP-3. This policy is similar to an owner occupied HO-3 policy in that it is a special form which means unless the loss was excluded, it will be covered. It is the broadest coverage you can purchase for your investment property. Typical losses like fire, theft, wind and explosion are covered under this policy. There are always some exclusions, and some of the more worrisome exclusions include flood, earthquake and landslide. In most cases, this coverage can be procured, but with a separate policy.
So you have the primary cash producing asset covered. Next are the adjacent structures. These include detached garages, sheds, fences, retaining walls, pools and anything that is that attached to the structure itself. For a lot of rental properties, your desire to insure these items may be limited; however, most DP-3 policies include a limit equal to 10% of the value of the dwelling as coverage for adjacent or “other” structures.
The next piece of coverage for landlord properties is the landlord furnishings. This includes appliances such as refrigerators, washers, dryers, microwaves, ranges or ovens, dishwashers, etc. It also includes any furniture provided to the tenants such as couches, beds, etc.
One of the most important coverage for investors is the fair rental value. If your investment property burns to the ground and you then build a new house, you are out the cash flow that you would have had otherwise received while the home is being built. Yet you are still on the hook for the mortgage. How do you protect yourself? With coverage for the fair rental value, this will pay you as if you had a renter occupying the property.
Liability coverage is a must in today’s society. As an investor you have assets you must protect. Many have learned that separating properties from personal assets in the form of LLCs is a great risk management tactic, but it’s not enough. When sued you will want liability coverage that will not only pay for damages you are legally held liable for, but will also pay for your defense costs. Both the damages and defense costs can be extremely high. As such, it is always a good idea to purchase an umbrella policy, which not only increases your limits of coverage, but also provides coverage in situations where the primary policy will not.
Finally there is medical payments coverage. What happens when someone gets hurt and incurs medical bills? Oftentimes the insurance company will actually pay for the medical damages, so as to say, “we have taken care of you, don’t sue us.”” When it comes down to it, insurance is an expense item, but an important one.
When done right it can ensure you can enjoy the cash flow from your investment for a long time to come, regardless of what mishaps occur.
Gila Insurance Group has put together a landlord insurance checklist of things you should discuss with your insurance agent. While it’s nice to have the list, the question is why are these so important? Here we will break this down, and explain piece by piece why you need to have these conversations.
|Proper Property Valuation||______|
|The Form – DP3- What’s Covered||______|
|Loss Settlement Option for Home||______|
|Water Backup of Sewer or Drains Coverage||______|
|Ordinance and Law/Building Code Upgrade Coverage||______|
Proper Property Valuation – Did you know that there are penalties for under-insuring your investment property? There are, and if you have under-insured your home you could be getting a lower payout if you have a claim. On the other hand, over insuring your home costs you money that you don’t need to spend. So how do you get it right? There are cost estimator tools, you can speak with a contractor, appraisals sometimes make sense, but mostly they focus on the market value. What we are looking for here is the cost to rebuild the home. That means we take out the value of the land, and focus on the cost to rebuild the home.
The Form – We have spoken about this at great lengths, and have even put together a form comparison chart, but when it comes to landlord insurance policies, these things matter, and investors tend to try to save money anywhere they can to bolster revenue. Don’t mess up your policy by not getting the “special form.”
Loss Settlement – We talked about valuation and replacement cost already, but there is a second piece to this puzzle. If you don’t have the home insured at replacement cost you could be in for a big surprise if you have a claim. Look the bottom-line on a landlord insurance policy is that if there is a claim you want things replaced, right? So you want to purchase replacement cost. In some cases, that might not be available, so make sure you get a stated value or full repair cost option on your policy, but ensure you understand what is being covered.
Deductible – If you want to save money raise your deductible. How high? How much cash do you normally keep on hand? The deductible is the part of the claim you are responsible for paying. It’s the part you pay first. The question is, if you are handy and unlikely to file a claim, then why have a really low deductible?
Water back up of sewers and drains – water backs up in toilets, showers, and sinks. It happens. And when it happens the damage can be great. However, in most situations the damage caused by the backup of sewers and drains isn’t covered, but it can be added. Your tenants aren’t you, and are likely to not treat the house the same way you would, so this becomes a very important coverage for landlords.
Earthquake – This is always an excluded coverage, but it can be purchased. Even in California. It can be expensive, but it worth discussing so that you can make an informed decision.
Flood – Again, always excluded, but can be purchased. The truth is that every house, investment property or otherwise, is in a flood zone, some are just in a “high risk” zone. That said, MANY floods that cause damage every year are not in a “high risk” zone. Ask! It might be more affordable than you think.
Ordinance and Law – Look our politicians do crazy stuff. I have even seen green, rather than golden arches. Crazy! So what does ordinance and law or building code upgrade coverage do? If you have a loss at one of your investment properties, and the municipality requires you to make some upgrades due to an ordinance or law that has been passed in the area, this coverage will pay for the increased cost of to repair or replace the damage/home that occur in order to comply with the ordinance or law.
To get a quote on your landlord insurance property start your quote online, and let us shop for you.
A landlord’s insurance policy covers the home and can include insurance for the landlord’s furnishings. This isn’t the renter’s stuff, that needs to be covered under a renters policy, this is your stuff. Coverage for the landlord’s furnishings is important, and should not be overlooked. Why, because even if you aren’t furnishing the home, the value of what you probably will furnish can be significant. Consider this; even if you do not furnish the home there may be a refrigerator, a stove, a microwave, maybe even a washer and dryer. If the microwave is built in to the cabinets then it would be considered part of the building, as would the dishwasher, but those other big ticket items are exactly that, even with those President’s Day Sales Prices. Even on the cheap you are looking at $2,000-$3,000 to replace those items. Maybe that isn’t a big deal, however, given the fact that you will already have a deductible you don’t want to compound your out-of-pocket costs with replacing landlords furnishing. Coverage is relatively cheap, and is worth considering.
Other things to consider, landlord’s furnishings are typically covered for “broad” form coverage not “special” form coverage without being changed. This means your stuff is covered for less than what the home would typically be covered for. If this bother’s you can often change the policy to cover your stuff under a “special” form.
If you are furnishing more than just the basic appliances, it is important to note that theft of landlord’s furnishings will not be covered, so if you are going to rent the home out fully furnished you will want to use other risk management techniques to protect your stuff, whether that be through a large security deposit or in some other way, and never furnish with something you can’t afford to replace.
Perils insurance against, what in the world does that mean. Here’s an insurance guy trying to explain the insurance options for rental property insurance.
Rental Property Insurance Coverage – Section I policy Form – Perils insured against.
Demystifying the stuff coming out of your insurance agent’s mouth
Perils insured against…. What does that mean? Let’s see if I can take off my insurance man hat for a second and put on my investor hat. Why? Because I believe this is where A LOT of insurance folks tend to lose their clients. It’s a simple thing, but we often get too caught up in the insurance lingo when we are explaining this stuff. So, here is my best attempt.
A peril is stuff that happens to cause a loss. So, stuff that happens, for which you are insured, is a covered peril.
Okay. Sometimes you will hear an adjustor or an insurance agent say something like, “in the event of a covered loss.” Well, what in the world is a “covered loss?” How could you know? That’s where the policy form comes into play. Policy forms are like a series of hooks on a wall, so we take our policy and we hang it on a form, then every time we read something like “in the event of a covered loss,” we can look at our hook, and we see if it’s covered in the policy.
Okay, so there are essentially 3 types of “hooks” or options for rental property insurance buyers. There are basic, broad, and special forms. That’s easy, but of course you will often hear agents referring to these as DP-1, DP-2, or a DP-3. This basically says it’s a dwelling policy with this kind of form… Now, each form has a list of stuff that gets covered. Basic being the worst and special being the best. Now that I have gone all insurance guy on you, let me break it down visually so that you can understand it.
THIS IS A GENERALIZATION, CHECK YOUR POLICY! THERE ARE THINGS THAT CAN CHANGE THESE LISTS LIKE THE PROPERTY BEING VACANT OR OTHER FACTORS!
Now before you get all crazy and say, “hey Broad has most of what special has, I bet I can save some money,” slow your roll. Let’s look at that last one; Risk of Loss with Exclusions. What does that mean? It means that unless the insurer specifically excludes it, it’s covered. That is a HUGE difference. In the first two options the insurer will only cover a handful of things, and if it’s not on the list, then it’s not covered. The last option, the special “hook,” says if it’s not excluded, its covered, which leaves hundreds of covered situations with a handful of exclusions.
LONG STORY SHORT? You’re special so get special. It’s as simple as that.
Start your quote online or call us for an immediate quote 1-877-784-6787.
Safford, AZ 85546
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