For over 35 years Rekerdres & Associates has provided insurance for multifamily real estate investors and property managers.
We’ve insured hundreds of millions of insurable values…buildings, business personal property, loss of rental income, or otherwise.
We keep a close eye on the property insurance marketplace….established carriers as well as up-and-coming programs.
We helped large real estate portfolios utilize and structure cost effective programs
But most importantly – we understand the major risk concerns for clients and how to address these items.
Below summarizes a few key points and offers insights:
Affordable rates
‘What’s my rate?’ is always a key questions for real estate investors.
Rates fluctuate with the insurance market and amongst carriers. Insurance companies with a large capacity (ie – a lot of money in the bank) will offer lower rates. Those operating on low capacity (ie – major losses have drained funds) typically charge higher rates.
Rates also depend on factors such as loss history, the condition of the building, the area in which the building is located, construction type, and facility updates…among several other factors.
So, regarding ‘affordable rates’, agents who 1) have a strong knowledge of the property insurance marketplace and 2) have strong relationships with those markets, will provide the best opportunity for real estate investors hoping to secure good rates.
Wind/Hail coverage
In the DFW area, wind/hail coverage is always going to be a big issue. Right now, a 1% to 2% wind/hail deductible is pretty normal.
Over recent years we’ve seen ‘deductible buydown’ policies becoming more common. This is, in addition to your commercial property policy, a separate policy that reduces the deductible.
For example, a policy has a $100,000 deductible, and the insured opts to buy a ‘deductible buydown’ policy, in which another insurance company contractually agrees to bring that deductible down from $100,000 to $25,000, in exchange for a additional premium.
Insurance requirements for lenders
It’s a real hassle when a lender requires additional coverages…flood insurance, earthquake insurance, business income / extra expense, boiler/machinery, GL, umbrella liability, etc.
Many of these coverages require access to specialty markets, knowledge of real estate contracts, and an ability to negotiate with loan officers.
It’s important to find an agent who’s persistent and works hard to satisfy a these requirements.
Replacement Cost vs ACV
Property owners sometimes argue that their building is over-valued on their policy, thinking their policy values are much higher than a selling price or tax appraisal.
Replacement cost is a completely different. It calculates the reconstruction costs, often using a ‘replacement cost estimator’ to determine the insurable value.
ACV (Actual Cash Value) is simply that replacement cost estimation, minus depreciation. Actual Cash Value estimates a lesser value, typically costs less premium, but provides inferior coverage.
These are key distinctions that drastically alter coverage. Real estate investors must work with an agent who is knowledgeable in this area.
Co-Insurance
Real estate investors or property managers may find themselves shortchanged on a property claim due to a ‘co-insurance penalty’. What exactly does this mean and how do you avoid it?
Here’s an example that illustrates how this might happen – An property owner has a policy containing ‘80% co-insurance’ terms. His / her building is accurately valued at $1,000,000, but he / she chooses to insure the building for $500,000 ($300k less than 80%).
After a major hail loss, the policyholder gets penalized for being under-insured, and receives a fractional claim-payout.
Moral of the story – make sure your buildings are adequately insured. Most agents who are property insurance specialists can help you determine accurate insurable values and state it on the policy accordingly.
Are You Working with an Expert?
- Does your agent have over 3 decades experience on real estate insurance?
- Can your agent access exclusive programs designed for real estate investors?
- Does your agent have experience working with loan officers and lender insurance requirements?
- Does your agent have decades of experience with property claims?
Consider reaching out to us.
We have extensive knowledge in this space, and can help you with your insurance program as a real estate investor.
Fill out the form below or on the contact page to get in touch.