Landlord Insurance

by Mr. Cheap

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One of the things every “Starting With Real Estate Investing” book or information source says is to get insurance. Obviously having your investment burn down or getting hit with a multi-million dollar lawsuit would suck. I’ve written before that I’m not a huge fan of insurance (and I really believe if you start buying everything an insurance salesman offers you you’ll be in the poorhouse soon). HOWEVER, insuring against catastrophic loss is what you DO want insurance for. The insurance companies can make money in the aggregate, and you can avoid potentially devastating misfortune.

As I was completing repairs, I started calling agents wanting to buy insurance for the condo. With each one, the conversation went the same way. I’d tell them I’d bought a condo as an investment property, and wanted landlord insurance. They’d ask me who provided insurance for my primary residence. I’d tell them I rented, and didn’t need insurance for my residence, then they’d tell me they couldn’t sell me insurance.

It was very odd.

I’ve had a very few occasions in life when someone just flat out refuses to sell me something that they seem to be offering for sale and it throws you for a loop. I don’t even get angry, just very confused. I asked them who I should be calling to purchase insurance from, if they couldn’t sell it to me, and each of them said they didn’t know.

Finally I lucked out (after calling about 10 agents) and found someone who seemed to understand his business a bit better. He told me he couldn’t sell me insurance for my condo UNLESS I bought tenant insurance too. No problem I said (at this point I was desperate). I ended up getting full coverage for both residences (I’ll never use my rental insurance) for $40 / month, which seems very reasonable to me.

The morals of this story are:

1) Persistence pays off

2) If you want to get insurance for an investment property, get insurance for your primary residence as well (whether you want it or not) to make your life easier

3) Stick with people who know their business / do your business well. The insurance agent who sold me the right product is going to get first shot at all my future business.

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{ 12 comments… read them below or add one }

1 growthinvalue

That’s very odd. None of them were able to tell you why they couldn’t or wouldn’t sell you insurance?

In my experience, insurance sellers are always willing to sell you any insurance they can, regardless of whether you need it or not. Like my college buddy who tried to convince me of the benefit of life insurance just after I’d finished school. Despite the fact that I had nothing of value and no dependants, “it’s dirt cheap and you can borrow against it later” he told me.

That’s very odd that multiple insurers wouldn’t sell you coverage. There must be a reason.

2 FourPillars

Insurers always have a problem with something ‘unusual’. When we did a big reno on our house we had a very difficult time getting house insurance because we weren’t living in the home at the time.

As Mr. Cheap explained it to me, his condo has insurance for tenant liability but it has a $40k deductible which is what he needed the insurance for. I wouldn’t have thought this is “unusual” but apparently it is.

On the other maybe his habit of introducing himself on the phone as “Mr. Cheap” threw some of the agents off? :)

3 Gates VP

Insuring a home in which you don’t live without having any insurance on your primary residence kind of sounds like you’re running a scam.

“No, no, I didn’t sell my stuff, I just brought all my expensive stuff over to the rental property like 3 days before it burned down” :)

Truth is, I’m kind of surprised that you wanted to insure your house, but didn’t already have tenant’s insurance. OTOH, the ten agents you spoke with should’ve been able to communicate this to you. All in, $40/month for both is good deal.

4 ThickenMyWallet

The insurance agent engaged in tied selling which is illegal.

5 FourPillars

TMW – you’re right but it happens all the time. We had to do the same thing to get insurance for the home under renovation.

Mike

6 Mr. Cheap

GIV: I found it perplexing as well. It was like walking into a car dealership and having the guy say “sorry, I’d like to sell you a car today but I can’t” and not getting any further explanation… They just kept saying that they didn’t have the product I was looking for for sale and they didn’t know who did. Very weird.

Mike: yeah, for some reason people aren’t interested in having a business relationship with me when they hear my last name ;-)

Gates: that could be it… I think it would be a very rare person who was looking for what I was and that might have been what threw them (as Mike says).

TMW: Really? Should I blackmail him for big bucks now or would that be illegal too? ;-)

7 NeverStopBuying.com

It is an unusual situation, not having a PR already and not having an insurance
don’t you have car insurance company to go with?

We have 2 car + 3 house insurance with StateFarm. Adding rental property is as easy as a 5 minute call with MLS detail/house info (tenants obtain their own personal contents insurance though)

8 Mr. Cheap

NSB: I don’t own a car (I have my license, but I just rent when I need one).

9 Af

Some insurers won’t sell to people cause they think they can be liabilities. If the insurer has too many claims they pay penalties and can even lose the right to sell that type of insurance. Half my family is in the business which is how I know.

Why not specify that your tenants have to get apt. insurance before moving in? My current rental (condo) had this clause, and I’ve encountered it before as well. Btw, it is much cheaper for renters to get insurance on the same unit than it is for the owner. We pay just over $100/yr with no deductible and up to 40k coverage.

10 Nick

I have been working on a house in a good neighborhood, houses sell for $450,000. The house was rented to the wrong people, it turned into a drug house run by bikers. It now needs $150,000 to renovate – will the insurance company cover the damamges, maybe.

11 Mr. Cheap

Nick: At least you know a good handyman :-). Insurance companies love to promise you the world but not deliver it. They *MAY* argue that you should have kept a better eye on your property and prevented it from taking as much damage as it did (e.g. you should have evicted the tenants before they did so much damage).

No idea what their reaction will be, please let us know!

12 Paul DeJong

I am running into the same problem finding insurance. I currently live at home as I am in my early 20′s and travel so much for work I am barely home, well rates are low I want to buy a rental property a condo. I cant get insurance as they say I need to have a primary residence insured with them. Which compant did you have insure you?

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