How an Umbrella Insurance Policy Works: Limit Your Investment Risk! - YouTube

Jeri: Hi investors! My name is Jeri Frank and I'm Co-founder and CEO of AssetRover,

and, today I'm here with Shayna Fridinger, who is a risk consultant with Millhiser Smith.

Jeri: Welcome! Shayna: Thank you! Thank you for having me.

Jeri: So, we wanted to ask you

a series of questions about what you do for real estate investors.

So I thought we would start today with you just telling us a little bit about yourself

and how you became an insurance agent and a risk consultant.

Shayna: Well, similar to probably many people in my field, you don't decide when you're at a young age that you're going

to become an insurance agent. It's something that I came across in an entry level position

in a claims department, found that I had a real passion for it. I really enjoyed the

field, started educating myself more and working my way up the food chain, and decided that

sales and personal lines specifically is where I wanted to be.

Jeri: Excellent...and what do you do differently as a risk consultant for investors

vs. a home buyer? Shayna: Well, ideally when someone

comes to us and they're looking to purchase and starting off with investment properties,

we're really going to want to have them look at their entire insurance package. That prevents

any type of gaps in insurance for the both the investment properties: their home, their

autos, additional liability protection. It also provides them with the individual discounts

they deserve for insuring all of those entities with one carrier, or at least within the same agency.

Jeri: Is there, can you elaborate

a little more on what kind of gap you're talking about?

Shayna: Well, when you're looking at liability, that's really where your exposure

is for gaps. If you have your homeowner's with one carrier and with one agency and investment properties

with another carrier, even an umbrella, which is an additional level of liability

protection, with another carrier, you're concerned about whether or not the underlying requirements

are being met. In the event of a loss, you're also dealing with three different carriers

at claim time. We've had some pretty substantial weather-related claims that come through with

major storms that could definitely affect all three of those entities.

Jeri: So there really is some benefit to keeping every under one...

Shayna: Without a doubt. Jeri: Yep, alright.

What kinds of questions should an investor be asking when they're looking for an insurance agent?

Shayna: Well, I think when anyone's looking for an insurance agent they're going

to want to know the level of experience they have, and they're going to want to make sure

that they have the level of experience that's going to allow them to be an asset to their

insured success, but by the same token, be proficient in the new and upcoming resources available.

I would also find out their availability...I mean, if they're the type of investor that's

going to need to be touching base with this agent often, are they in the office on the

regular basis? If not, are they available on their mobile phone? The level of communication

between the investor and agent is going to be key, because you want to be able to build

that relationship and have it continue to grow.

Shayna: The size of the firm they work for...that's also extremely important,

especially if you're just starting out. An agent can be handling one or two properties,

especially if they're in a one man shop, but as they continue to grow, it's going to be

important that that firm can handle your growth and your success and maintain that relationship

without having to be moved to another agency.

Jeri: So, if I want to summarize that:

experience, ability to grow with the investor...

Shayna: ...and relationship. Jeri: Yeah, relationship, communication...

Shayna: Yep, absolutely. Jeri: Alright! In addition to insuring

investor property, is there other types of insurance that an investor should be aware

of and think about when they're...assembling their team and assembling their insurance?

Shayna: I think liability protection is really the key component in addition to

the property. You know, often times people will think of the tangible property that they

have invested in and making sure that, in the event of catastrophic loss, it can be

rebuilt and that that loss can be assessed, but I think that the bigger picture oftentimes

comes with the liability exposures, the unknowns. Unfortunately, we are in a society right now

where people are filing suits all the time, and as a new investor, you may not be well

versed in what potential liability suits could be coming at you, and so, for that we'd always

recommend an umbrella. That is, you know, an absolute. We would want to make sure that the investors,

both their properties that they are purchasing as investment properties in addition to their

personal home autos, are protected under a liability umbrella.

Jeri: And usually, when I think about an umbrella policy, in my previous thought

pattern, I always thought, "I'm not a wealthy person. I don't need an umbrella policy."

Shayna: Sure

Jeri: Can you help explain that?

Shayna: And it has more to do with the potential risk than it does your actual

net worth. Obviously, if there's a substantial amount of net worth, any attorney who is helping to

file a suit is going to recognize that, however, it has more to do with what your

legal liability would be and quite honestly, your net worth doesn't always have to coincide

with the exposure there. So, I honestly, I will work with an umbrella and sell an umbrella

to a person who is in a renter's policy and has a single car auto. I think that they're

an extremely powerful piece of protection at an extremely reasonable premium.

Jeri: Hmm, thank you. That's great, good to know. Can you give us an example of

something that's been fairly eye-opening to you as someone who's used your services in

the past? Shayna: Sure, regarding investment

properties, there's been quite a few recently. One of the things that has been a real issue,

especially in our area and industry, is roofs. The underwriters right now are really cracking

down on the condition of a roof. So, if we have an underwriter that's looking at an investment

property and there's any indication that the roof could be more than 15 years old, there's

an exposure there that they may amend the coverage to actual cash value vs. replacement

cost. A 15 year old roof is not an old roof, so that can be a real eye-opening experience

for an investor. Another would be the unfortunate situation where you purchase the property,

it's in excellent condition, it is ready for a tenant, and it just doesn't rent. Then you

have a vacancy issue. Most of our policies are going to stipulate that the property be

rented, so after about 3 months an underwriter's not going to be feel comfortable with a property

that's sitting empty. The good news is, you know, at this agency we have several different

options. They're not always ideal when it comes to premium, and so it's really really

helpful if you have a renter lined up or that situation never occurs, but again, those are

some things that a new investor may not be prepared for.

Jeri: Right...are there other trends that you're seeing in the insurance industry

that we should be aware of or think about? Shayna: Updates are key. The underwriters

are going to want to know when we submit for a quote that again, the roof has been updated.

Circuit breakers are something that's really become almost a requirement with all my carriers.

If the home has fuses, it certainly doesn't mean that it's not an outstanding electrical

system, but usually underwriting is going to turn it down. So, if you are looking at

investment properties and it does currently have fuses, I would consider maybe even adding

that to part of a purchase agreement, because then you're running into an insurability after

you've purchased your property.

Jeri: What kinds of advice would

you give to a new investor as they're getting started?

Shayna: I think if I could point out one thing, it would definitely be to really

know the property well. I think it's key to make sure that you know any type of claim

history that could be at the location. You know, unfortunately, if you end up with a

property that looks ideal and is tenant ready, it could've had some loss history that you

may not be aware of. Unfortunately that loss history may end up causing you some liability

issues in the future. One to think about would be like a past water loss, you know especially

substantial water loss, where unfortunately in the future you could be looking at some

mold issues. Again, then you're dealing with some tenant liability issues. Those claims

should be disclosed to you when you're purchasing the property, and certainly, "I" would recommend

having it be part of a purchase agreement that the property be inspected and that any

claim history be fully disclosed.

Jeri: Are there any unique services that your company offers that investors should be aware of?

Shayna: Well, I think Millhiser Smith is really key on educating their clients

and being an advocate for their entire insurance package. We're here to be an ally for you,

we represent some outstanding carriers and so, it's our job to make sure that when you

call in about a question, about a current policy, or you have a potential claim, or

you have some concerns about a location, that we're here as a resource and somebody who

can educate you in our field to make sure you're making all the best decisions that

you can. Jeri: Great, thank you.

Jeri: And odds are, at some point, and the more properties you have, the more likely this is going to

happen, you are going to have a claim. Shayna: Yes.

Jeri: And...what should a real estate investor know about that process up-front

so that they can be prepared for it? Shayna: I think a big part of that

is going to be the mentality that you have around a claim. When you purchase an insurance policy,

be it for an investment location, your primary home, or even an auto, the policy is

there to protect you from financial hardship as a result of a loss. That's its goal. So, if

you are experiencing a potential claim or you're in the middle of a claim, the reason that

you use your policy is to prevent you from going into any financial hardship.

That being said, I think that when a client of mine calls in and has a question about

a claim, one of the things we do is talk through it. Is this something that you can self-insure

this time? Is this something that is catastrophic enough that you need to use your policy and

it's appropriate to do so? We want to make sure that our clients are insurable at every

single renewal. So, it's key that there is a frequency issue with claims, and so we make

sure that when they call in, if it's a small claim and it's been coupled with a few other

claims, we're real honest and they're aware that we could be bumping into an insurability issue.

So I think how you view the whole claims process is key.

Jeri: Going back to a little bit around the umbrella policy...can you explain a

circumstance where the umbrella policy might come into play and how that works?

Shayna: Sure! From the investor's perspective, when you sign a tenant up and they

sign the lease, and they disclose everything that's going on with them at that point in

their life, you have a full picture of what you're entering into with the contract with

this individual and his family. I have a feeling though, that circumstances change throughout

the year...I mean, if you have not told the tenant, for example, "We don't allow trampolines,"

they may assume, "hey, let's put up a trampoline." Or..."we don't allow dogs." They may assume,

"we didn't think we couldn't have a dog." Unfortunately then, some passer-by or even

a guest of your tenants gets hurt as a result. If any one of those type of risks that you

weren't previously aware of. the liability exposure could be astronomical. That's when the

umbrella is going to save you, because the tenants have kids, who has a friend over, who

gets hurt on the trampoline and all the sudden you're looking at 750,000 in medical bills...

and because it's your property, you're supposed to be aware of what's going on on it.

Jeri: This has been a very enlightening interview for me, and I have to ask, how many

years have you actually been in the insurance industry?

Shayna: Well actually, 18 years, so, I'm really lucky because it's something that,

as I mentioned, I accidentally fell into, but I've continued to love every year

and I am very passionate about my work and I enjoy coming to work every day, and so not

not a lot of people get to say that. Jeri: That is true...if someone

is interested in working with you, how should they go about contacting you?

Shayna: Well, I'm here at the agency and I can be reached by phone or by email.

And then, I do want to make sure that the investors know, as they're starting out, if they're

looking for someone to review properties and look at quotes and analyze their entire

insurance package, I'm more than happy to spend the time doing that. Ideally, we'll

put something fantastic together for them, but sometimes it doesn't always work out,

and if that's the case, at least I can be a resource for them as they're starting out.

Jeri: Excellent! Thank you very much.

Shayna: You're welcome.