In this video, we’ll take you through the essential steps and strategies to ensure your properties are well-protected.
We’ll explore different insurance options, provide key considerations when selecting coverage, and share tips for cost-effective insurance solutions.
Don’t leave your real estate investments to chance – join us as we demystify the world of insurance and help you make informed decisions to secure your financial future.
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Transcript:
Jamie Bounds 00:00
Katelyn is going to be talking about ensuring your real estate investments. And like Chris mentioned, that is so crucial. A lot of people don’t even realize the types of insurance that are needed in various whether you’re doing rental property or a flip, you need insurance. So a little bit about Katelyn. Katelyn is the vice president of sales at National Real Estate Insurance Group. She manages the sales team to help them better educate and serve real estate investor clients across the nation. So thank you so much for joining us.
Katelyn Williams 00:37
Thank you for having me. So as you said, my name is Katelyn, I’m with the National Real Estate Insurance Group. And I’m the vice president of sales. And I’m excited to spend the next 15 to 20 minutes with you guys talking about protecting not just you, but your investment properties. You guys have taken the time and put forth the effort and the money to invest in these properties and insurance could potentially save you in so many ways. So I’m excited to go through some of those just fundamentals and building blocks that you should be asking any insurance agent you’re working with, whether it’s us or somebody you know, down the street, that’s local to you. Okay, so who is the National Real Estate Insurance Group. So I just wanted to tell you guys a little bit about us andNational Real Estate Insurance Group is we cater to investors. That’s all we do is investment insurance.
So we don’t do owner-occupied, auto, health or anything like that. This company was built out to cover those investment properties, which have just become so much more popular over the past couple of years. And National Real Estate Insurance Group, what we can do is we can do everything from your single-family home up to your 20-unit apartment building. We can do multiple ownerships or multiple entities under one monthly schedule, which is huge. We can cover all phases of the occupancy status, everything from the ground up new construction to once you put the tenant in it and everything in between. Something that really sets us apart, though, is the fact that we are a monthly reporter. And what that does is it gives us the flexibility to not just do automatic monthly payments. But anytime you make a change to your property, you don’t have to rewrite the policy with us.
You can go from occupied to vacant to renovation all within the same month, and there’s no policy rewrite, which means there are no rewrites. There’s no potential for losing out on the minimum earned premium. The minimum earned premium is the first note that I want to really hit. Make sure you are looking at your insurance policies to see what their minimum earned premium is. National Real Estate Insurance Group does not have a minimum earn some policies are upwards of 75 to 100%. So especially if you’re on that fix and flip side that could cost you a lot of unnecessary money out of your pocket. I want to talk to you guys about essentially the building blocks of an insurance proposal. Right. So these are things that not just drive your cost but also affect your coverage.
So both are very instrumental but and they’re going to be the same no matter where you go, whether it’s with National Real Estate Insurance Group or again, the insurance company down the street. These are all questions that you should be asking to make sure you are truly protected. Property coverage forms is the first one we’re going to start with so basic versus special form. What’s the difference? Basic form coverage is protection against those perils that you see listed on the screen, so specified perils and you’re going to notice that water damage is not on there. Theft is not on there. Two very, very big potential exposures. Those two coverages really come into play on special form coverage.
So special form of coverage is coverage from all perils, except for those specifically excluded by the match or by your policy. So this is where you’re going to see your water damage. This is where you’re going to see your theft. There’s no right or wrong, should I have basic? Should I have special? It’s what helps you sleep at night and makes you feel like you’re the most protected. I will tell you typically, that the difference between basic and special forms is about 20% to 25% on your cost savings. So if you know that you’re going to have a $10,000 deductible, you know that you’re self-insuring against the first $10,000 in damages that happened to your property. So if you say, I don’t think that I’m going to have a theft over $10,000. Maybe basic form is the way for me to go. That is completely up to you. It’s what you’re comfortable self-insuring against.
The next one I want to talk about is our loss settlement method. So this is another really big one guys. So actual cash value versus replacement cost. We’re going to start with actual cash value because ultimately, they both initially pay out the same way. Actual Cash Value means if something were to happen to your property, the adjuster is going to come out and say, Okay, here’s how much the damage was, they’re going to say, here’s the depreciation of the property, then they’re going to take out your deductible. And then they’re going to say, here’s your bottom line number that we’re going to write you a check for. If you’re insured on an actual cash value basis, you cannot recoup that depreciation. So this is where you should be having the conversation with your insurance agent saying, What’s my exit strategy? If I were to encounter a total loss? Do I just want to walk away? Or do I want to come back and fix it and rebuild and continue on with that location? If you say you just want to walk away, I would definitely have that conversation about actual cash value.
But if you say no, I want to go back. I’m gonna fix the damages. You really need to look at replacement costs because what replacement cost offers is the ability to recoup that appreciation. So what does that mean? It means you’re in insurance company gave you your bottom line number, they wrote you a check. But because you’re on replacement cost, you can go back, fix the damages and then submit your receipts to your insurance company, and have the ability to recoup that depreciation. Right. Again, two very, very impactful things on your coverage. Depreciation, how that’s typically kind of determined is it’s based on life left of the property. So they’re going to evaluate things like the roof or the floors, or all kinds of areas of the property to help factor into that depreciation.
Something I really want to hit on here, guys is this is another one that could potentially save you 20% to 25%. But each insurance company you talk to is going to have different benchmarks for when these coverages start,. For example, with National Real Estate Insurance Group, our actual cash value benchmarks are, we start at $50 a square foot and we go to $69.99. That’s your actual cash value window. Anything $70 or more automatically puts you at replacement cost. So we have relatively lower benchmarks. And definitely ask your insurance company. Right. Where does that start? The next thing I want to point out here is coinsurance because sometimes you’ll see companies that have coinsurance involved with replacement costs with actual cash value. And you know what is coinsurance? Coinsurance is a penalty at the carrier’s discretion for potentially being underinsured. And so you know, it’s just another place that you could potentially have to pay money out if something were to happen. For example, again, with National Real Estate Insurance Group, our coinsurance penalty starts at anything insured at less than $50 a square foot.
And so we don’t offer our clients those proposals. Because we don’t want you guys to have to worry about it. We don’t want you guys to have to think, oh, gosh, do I have that penalty in there? Do I not which factor it out, but definitely make sure that those are questions that you are asking. The last building block, that’s gonna factor into your coverage and the cost of your proposal is choosing the right deductible. So, again, each insurance company is different. We offer a $2,500, a $5,000 and a $10,000 deductible. Typically, the higher deductible you choose, the lower the property rate is. Why is this such a big factor? So it’s ultimately again, what do you want to self-insure against? Do you know that you’re doing everything that you can to mitigate against losses? Great.
Do you have somebody watching the property all the time? Again, help watch for potential things that come up great. You might want to hire a higher deductible, a higher potential out of pocket or higher deductible to come out of that loss settlement. It’s whatever makes you the most comfortable. Now, that we’ve got property covered. Property is so so important, but what ultimately can make or break you as an investor is a liability. Liability coverage is the most important coverage you can have. I’ve worked with investors who only carry liability insurance. Again, that’s your prerogative. What is liability insurance? It’s your protection against third-party bodily injury. Did somebody come over and slip and fall and get hurt? Was there a terrible accident on the property? And unfortunately, somebody passed away. If it’s a fix and flip, did somebody wander onto the property because they were curious and they got hurt, all of these things are immediately going to pull you into some kind of lawsuit? Right. So the first thing with your premises liability that you want to look at is what are your limit options? So we offer minimum $1 million dollars per current and $2 million aggregate.
And so for a current stat is exactly what it sounds like you have a $1 million limit for that occurrence. Aggregate means you essentially have to $1 million occurrences per year. So just kind of to keep in mind. Right. As you’re learning the lingo on the questions to ask, but also make sure you’re asking what different limits that insurance company potentially has to offer? Because so we offer a 1 million, 2 million, a 1 million, 5 million and a 2 million, 5 million. So why do we offer all those different limits? We know that sometimes having a little bit higher limit can potentially be more cost-effective than jumping right into an excess or an umbrella policy. There is no right or wrong answer for when is it time to get an excess or an umbrella policy. Again, guys, it’s whatever helps you sleep at night knowing that you’re insured. Typically, what we say or what we talk to our clients about is once you hit about 10 locations. You can really start to look at that umbrella coverage.
But if you’re asking what limits they offer, it may be more cost-effective. You might even get more coverage with a little bit higher limits per location. That’s the other thing is to make sure your limits are not shared amongst all of your locations and that each location has its own liability limit. The next thing to ask about when it comes to liability coverage is first-dollar coverage Meaning, that is a deductible for your liability insurance. Once you get through those questions with your insurance agent, you want to start to look at what’s included in the limit and what’s excluded. So since the cost is a huge one to talk about, because if your defense cost is inside the limit, and something happens, your defense cost is going to eat into that $1 million payout.
National Real Estate Insurance Group, for example, our liability policies, the defense cost is outside the limit and there’s no max. So very important along with pollution coverage. Typically this is excluded. Pollution would also be like your carbon monoxide. So a huge exposure on any investment property. And then, canine exclusions. So even though we tell our investors, well, you can’t have any dogs on the property. Inevitably, sometimes we have those tenants that may or may not listen and still sneak one on there. So you want to make sure that there’s no breed exclusion within your liability policy. I think it would surprise a lot of people to see what breeds are truly excluded. Because that list is it was significantly longer than I was prepared for when I first saw it. So all questions to you know, take the time, ask your insurance agent, make sure you have those conversations with them. Once you’ve gone through your building blocks, you’ve covered the property.
You talked about the liability, it’s time to look at what am I missing? What other coverages are out there for me as the investor or the owner? And so a few coverages that we offer outside of the property in the liability are flood coverage. So flood is completely different than water damage. Flood is your outside rising waters. But it’s not factored into a master policy. It’s a separate endorsement. It’s a separate coverage to get along with earth movement. So, Earth movement, that’s your protection against earthquakes, shock, perils and sinkholes. So, even though you’re not near a fault line, are you potentially somewhere that experiences sinkholes? Again, write something to look at is it in your property policy. It’s probably not. And so you might want to look at that additional coverage. Terrorism so this one’s a little bit newer to the insurance world and we include it on all of our proposals for $1 per unit per month. And for total insured value coverage, guys. Right.
It’s not expensive for that extra protection. Especially, as we’ve seen over the past couple of years we’ve seen some of those rights and that kind of thing. This is that coverage that could potentially protect you from some of those damages that you might never see coming. Ordinance and law coverage is another great one. This one’s also kind of known as bringing it up to code coverage. Right. So, especially if you’re working with like older properties, even if they’re newer. It’s another coverage to make sure you keep on your radar and have that conversation with your insurance agent. We offer what we call a tenant protector plan and it’s an alternative in a sense to renter’s insurance, but it’s extra protection for you as the owner against the tenant. Negligent damage, not intentional but negligent. So, this is a product that is pretty unique to National Real Estate Insurance Group. So if you do end up requesting a proposal from us and you’ve got an occupied property, I would absolutely recommend having that conversation with your sales advisor.
And they’ll be reaching out to you to talk about it and explain kind of how it could benefit you. And this is another one that’s like anywhere from $10 to $14. extra a month. So we talked about extra protection for you guys. Right. Those extra additional add on coverages. What about for your tenants? So again, right. Renter’s insurance, this is a huge one to talk about. Are you going to require it as an investor or are you not? And we offer a renter protection plan. And we also offer canine guard, which is an additional canine liability. So do not underestimate what having dogs on a property could do. It raises that exposure and that risk for you as the owner.
And so again, right, make sure you’re exploring all of those options. I know insurance and it can be a little overwhelming sometimes. So just break it out piece by piece, kind of like we just did look at the property, look at the liability and then say, “Okay, what am I missing?” They start with where your properties are located. If you’re on the coast, make sure you’re looking for that named windstorm coverage. If you’re right next to a fault line, am I protected from earthquakes? So break it apart and have those conversations with your insurance agent. I have included on the slide. A link that you can use if you’re interested in getting a proposal from National Real Estate Insurance Group. We’ve got a great team of sales advisors and client service advisors that would be happy to go through any and all questions that you guys have. Chris is welcome to share my information. If anybody would like it. I’m always happy to get on the phone and talk to you guys. Right. We are so big on helping educate our investors on how to make sure they’re protected.
Chris Bounds 18:00
Thank you so much, Katelyn. It’s been a real pleasure working with you all. I’m starting now, insurance was a check-the-box task for us. I mean, obviously, you need it for the obvious reasons. And then lenders require it. But beyond that, it was got insurance. Yeah, got it.
Katelyn Williams 18:23
Right.
Chris Bounds 18:24
There was no thought process or education. And that’s my fault. Maybe, I just didn’t know. I didn’t know how to ask the right questions. And I remember when but it was more than a year later when we realized like, “Hey, if you flip a house and it’s been on the market for 90 days. Like, to check that little writer, you might not have coverage anymore, or maybe different coverage is limited
Katelyn Williams 18:53
Exactly.
Chris Bounds 18:54
Or what you’re signed up for. So you get to switch to the vacancy policy, and then all the stuff. So I love the all kind of we all cover all bases and provide such a valuable resource to investors, whether they’re large or small. But I’m especially in our case where we had a portfolio of properties to deal with and the whole process so easy.
Katelyn Williams 19:21
Well, we are so happy that we’ve been able to help and that you had us on to talk. We want insurance to be more than just checking the box. Whether, you’ve got one location or you’ve got 60 properties in your portfolio. That’s what we’re here for.
Chris Bounds 19:33
Yeah.withAll other insurance no one really, really cares about it too much until you need it.
Katelyn Williams 19:39
Exactly.
Chris Bounds 19:39
I hope to never need it. But in the case, you know, I’m definitely Jamie and I were happy to work with you all and definitely have happy to have you on and share the love to all these other real estate investors out there.
Katelyn Williams 19:54
Absolutely. Thank you again. It’s been great.
Chris Bounds 19:56
Absolutely. Thank you. Take care.