Reasons A Commercial Insurance Policy Is Better than most Personal contracts for the Real Estate Investor...
- Many commercial forms will include coverages such as rental loss and additions and alterations coverage.
- To increase liability on a commercial form from the typical $300,000 to even $2,000,000 is minimal (around $50 per year for the entire contract---regardless of number of units) with most carriers
- The generic pollution exclusion found on most personal type contracts is addressed by some commercial policies to consider/cover pollution that emanates from a heating source (i.e. carbon monoxide).
- On a master (AKA "blanket") policy, as you grow and add properties, the rate drops proportionately. Personal policies only insure one property per policy.
- Related to #4, in the event of a catastrophe, such as a tornado, the deductible applies once for the occurrence, not per location.
- The deviations to carry higher deductibles are cost-effective under a commercial policy much more so than most personal contracts. In other words, carrying a $2500 deductible on the commercial policy may save 15% of premium versus a $1000 deductible. On a personal policy, the same change my only generate half the savings...gives some food for thought on consideration of catastrophic deductibles such as a $5000 or more especially as you add more units.
- Many insurers limit the number of units they will insure under personal contracts, and as you've discovered, will not consider non-personally owned properties for coverage. I don't like the idea of the insurance company limiting my asset protection options in this manner.
- The "fire and hazard" policy you have may be a named-peril policy only. The commercial policy can and should be written on an "all-risk" form. "All-risk" simply means that unless a peril is excluded, it is covered.
- With many commercial policies, you have the ability to add newly acquired properties up to $250,000 automatically for 90 days. You many times have up to 90 days to call and add the "new" location to the policy.
Tim Norris
www.nreinsurance.com
www.reiainsurance.com
888-741-8454
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