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Rental Property Insurance: Tips & Advice - YouTube
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hey this is Jeremy the owner of shine
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insurance agency and your host for the
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YouTube channel that you're on right now
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shine insurance today we're gonna talk
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about investment properties and we're
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gonna dig in so if you don't own any
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investment properties and you're just
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thinking about buying one you have a
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couple or you have 200 if you want to
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understand insurance we're gonna break
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it down for you real simply real easy
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right now property insurance are
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basically has three types
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the first is homeowners insurance simply
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put that means that you are going to be
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living in the house that you own the
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second type is tech tenant occupied
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houses probably what most of your
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investment properties will be this is
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when someone's living in the property
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that is not you and the third is vacant
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properties properties that don't have
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anyone living in them at all the first
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type homeowners insurance is not what
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we're going to talk about in this video
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there's other videos on our channel if
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you want to check out homeowners
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insurance you should go check those out
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let's talk first about the second type
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which is tenant occupied first of all
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you really need to have a lease with
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your tennis you haven't need to have a
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lease set up probably have an attorney
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put that together for you so that your
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tenants have signed something and agreed
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to how they're gonna take care of the
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space what they're gonna pay for what
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they're not gonna pay for all those
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kinds of things why that's important
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when it comes to insurance is that
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insurance claims are based on those
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lease agreements it's super important
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that you have those in place when a
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claim happens because the claims
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adjuster the people that are working on
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the claim itself is gonna look at that
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lease agreement as a way of deciding
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who's responsible for whatever it is
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that happened especially if it's a
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liability claim so having a lease
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agreement is super important let's talk
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about the actual coverages so there's
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basically two types of insurance
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coverage on your investment properties
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one is going to be property coverage as
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simply coverage for the structure itself
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if a fire happens if a tornado happens
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if something happens to the structure of
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the home we're going to take it back to
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the way it was before we're gonna
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rebuild it or fix the damage based on
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the insurance policy that you purchase
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so the first kind of coverage you have
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is property
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second kind of coverage you have is
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liability this is coverage for bad
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things that happen to other people
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because of your property so if someone
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tripped on the front steps or if there
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was something that happened on the
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property someone was hurt and they
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either needed medical attention or they
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hired a personal injury attorney and
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either way your insurance policy has
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liability coverage there to help deal
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with that situation in my opinion you
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want to have at least $500,000 of
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liability coverage on your policy if you
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have more properties which means more
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exposure to bad things that happen I
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would increase that to a million and
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maybe even have a one two or three
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million dollar liability umbrella on top
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of that really depends on how much
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exposure you have how many properties
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you have and what your comfort level is
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with your your liability coverage how
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much coverage you want to have you can
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never really go too high on liability
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coverage because if something bad
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happens you want to make sure that you
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have enough liability coverage on your
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policy to deal with even the worst case
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scenario so you have property coverage
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coverage for the structure and liability
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coverage coverage for bad things that
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happen to other people because of your
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property those are the two types of
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coverage we'll talk about let's start
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with property we want to insure our
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building for the amount of money would
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actually cost to replace it
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now this may have nothing to do with the
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amount of money you bought it for in
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fact if you got a great deal it's
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probably going to be higher than the
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amount that you bought it for in general
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properties are insured from between a
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hundred and twenty-five dollars a square
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foot to even up to $200 a square foot
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for super super nice properties so
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that's the ballpark that you want to be
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in but you definitely want to talk to
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your insurance agent and talk through
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the property coverage limit the building
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coverage limits for your property and
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make sure that they're properly insured
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this is a great place to talk about the
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coinsurance clause a coinsurance clause
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is really kind of insurance geeky and I
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won't dig too deep into it but basically
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if you under insure your property if you
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don't insure it for the actual amount
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that it would need to be replaced
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in a claim even a small claim they're
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going to penalize you in that claim
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situation and actually give you even
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less money than they should if you
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haven't properly insured the property so
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a coinsurance clause is generally a
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percentage of what the house should be
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insured for so if you see a 100 percent
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coinsurance clause that's kind of
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concerning that means that you're gonna
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be penalized if you underinsured at all
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if you underinsured at all that
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coinsurance clauses gonna come into
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place and penalize you most of the time
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when I write but when I put policies in
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place for investment properties I want
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to see a coinsurance clause of 80% which
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means there's some wiggle room there
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we're gonna insure for at least 80
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percent of the replacement cost and
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properly we should ensure all the way to
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a hundred percent of the replacement
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cost but because that coinsurance Clause
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is set at a lower level we've got a
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little bit of leeway there so that we
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don't get penalized in a claim situation
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even if it turns out we were a little
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bit underinsured so if you have a
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coinsurance clause on your policy 80
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percent is what you want to see and if
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you have a hundred percent you better
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make sure that you actually are insured
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to the replacement cost of the property
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are you gonna end up in trouble in a
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claim situation so we've got building
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coverage the coverage that it's gonna
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actually coverage for actually replacing
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your house and then we want to be aware
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that coinsurance Clause as a part of
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making sure that our building is covered
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properly and our claims are paid in the
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best way possible
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okay couple more types of coverages we
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want to talk about one is called
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business income coverage you're making
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money off of these properties right
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you're getting a certain amount of rent
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from the renters each month probably if
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that house were to burn down and it was
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going to take a whole year to replace
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that house then you wouldn't be getting
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income anymore the renter doesn't have
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to pay rents if that property isn't
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there for them to live in anymore and so
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you lose income because of that so not
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only are you having to rebuild this
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space but you're losing income that you
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would have had if the bad thing hadn't
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happened if the fire the tornado or
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whatever happened happened
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happened and so I suggest that you have
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building income coverage on your policy
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or excuse me business income coverage on
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your policy and you have that for the
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amount of money you would make off of
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that structure so if you're getting
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rents of ten thousand dollars per month
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from a given structure then you want to
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make sure your business income coverage
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is set at ten thousand dollars per month
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now there's lots of little details on
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business income coverage not going to go
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too deep into it right now but
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definitely make sure you have business
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income coverage on your policy there's
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lots of other types of coverage on the
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policy there's cyber liability there's
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equipment breakdown there's all
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different kinds of little things that
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I'm not gonna dig too deep into because
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this video is just generally about
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investment properties so you definitely
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want to talk with your insurance agent
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and ask what do I have what don't I have
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and make those decisions if your
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insurance agent included something that
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ultimately you don't want to have that's
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okay you talk it through with them you
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decide to remove it no big deal so talk
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through the property coverage talks
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through the liability coverage make sure
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the coinsurance Clause is at about 80%
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if not lower make sure you have business
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income coverage on your policy and you
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should be all set last thing I'll talk
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about before kind of going to the next
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step is you're gonna have a deductible
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my suggestion for properties if you have
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multiple properties is at least $2,500
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you don't want to make a bunch of small
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claims it's gonna make your insurance
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premium go up anyway so have at least a
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twenty five hundred dollar deductible
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and if you have lots of properties you
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might even have a five thousand or ten
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thousand dollar deductible on your
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insurance policy making sure you don't
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make those small claims and get yourself
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in trouble with your insurance premium
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going up because you had two three four
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claims in the last couple of years
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that's definitely what you want to avoid
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so having a slightly higher deductible
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$2,500 at least is a smart idea
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on investment properties after you put
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the policy in place oftentimes the
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insurance company is going to want to
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come out and take a look at it and
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there's a few things that they're
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looking for and might suggest you make
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changes about so I thought I'd just
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point it out if you have any stairs in
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your house either outside
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or inside they're gonna want to have a
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hand railing on those stairs if you have
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a sidewalk that has cracks or different
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levels they may want you to level it or
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figure something out about that if you
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have older roofs they may decide to
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either change the coverage on the roof
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to what's called a CV coverage a lesser
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coverage or they may even say you know
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the roofs too old there's probably gonna
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be a claim soon and we don't want to
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insure the property so you would have to
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replace the roof or find another
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insurance company who's willing to
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insure a house with an older roof so
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roofs furnaces handrails you know the
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fact that there's fire extinguishers in
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the house or smoke alarms if you have a
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sprinkler system in your apartment
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complex or something like that that'll
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be a positive as well just all those
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kinds of things are parts of how the
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insurance company's gonna take a look at
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the property after the policies been put
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in place to make sure that it's up to
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the standards that that insurance
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company expects when they're insuring a
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home so that's pretty much it if you are
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looking to invest in properties it's a
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great investment they're a wonderful way
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to invest your money and make money on
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top of that over the course of time lots
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and lots of people invest in properties
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I hope you learned a little bit about
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property insurance in this video and
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please go ahead and make comments below
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ask me the things I didn't talk about
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and I'm more than happy to describe
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those to you so until the next time have
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a wonderful day
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