Your Team…The Insurance Agent

 

You now should have an attorney at the ready for you. The next step is the insurance agent. Not just any will do. You will need one who specializes in commercial properties. Because you are investing in the name of your LLC, you will be subject to commercial insurance. The insurer expects you, the owner, to not be personally occupying the building. Unfortunately, this is a larger risk, and your premium will be higher. Be sure you inform the insurer of this fact before she works on getting quotes for you.

An insurance agent is another person that you can get from your real estate association. You have your attorney now, perhaps you should ask him who he has seen other investors use. Be sure you interview the insurance agents as well. You want someone you can work with for a long time.

Once you have found your insurance agent you can tell her exactly what types of properties you are interested in purchasing. She will be able to keep this handy for the time when you work on your first deal. She won’t be able to give you a quote yet as underwriters want specifics of the property before giving a quote. The agent should be able to give you a ballpark figure. If she is unwilling to do this, find another agent. Remember that the figure is for reference and you won’t be able to hold the agent to that as you might for a quote.

In the future, once you have made a purchase on property and insurance, the insurance agent will have a copy of the policy and you will be able to call her if you have a problem.

What about the deductible?

On my properties, I like to have a high deductible with a lower premium. I pay a year in advance and get a discount. My deductible on my single-family residences (SFRs) is about $2,500. SFR, by the way is a stand-alone house that one family lives in. One apartment in a building of apartment units or one side of a duplex is not called an SFR. These are called units and they are a unit of a multi-family residence (MFR). As I stated, I have a $2,500 deductible, so most repairs are not covered. Keep in mind that my high-income allows me to pay for the emergencies that are less than the deductible and cannot be payed by the insurer. This happened to me only once in the time I have owned real estate. A sump pump failed and the basement was flooded. Luckily, there was no damage to the walls, but the place needed new carpet and mold mitigation. I was able to do this for lower than the deductible and I payed out of pocket. If you are worried about having to do this, you can opt for a higher premium with a lower deductible. The difference won’t be large, so I feel it is a matter of preference.

Once you have the first purchase agreement on your first deal, get this information over to the agent to have her start looking for quotes. She will shop around and should be able to get you the best deal. In my experience, you will be paying 25% higher premiums as a commercial product vs residential but I’m sure this will vary. You also may wonder if you should shop around insurance with each deal. You can certainly do this but I prefer to have a single agent whom I can contact if there is a problem. I think that this efficiency is worth the extra I may be paying.

Lastly, be absolutely sure your property is insured on closing day. It is your new property, don’t lose it through a silly mistake. If you use a bank, the bank will require it. That reminds me: you need a banker.

 

Let’s talk about that next.

 

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