When you buy insurance to protect your investment property, there are two distribution models you can choose from Direct Writer or an Independent insurance agent. 
 
​The agent who works for a Direct Writer is an employee of the company and represents one company. If your property does not fit the risk profile they like, you will have to seek an alternate solution. Examples of companies that use the Direct Writer model: are Allstate, American Family, Country Company, Farmers, and State Farm. Direct Writers primarily write Personal Lines insurance, Home, Auto, Boat, and Umbrella. As of 2016-2017, Direct Writers wrote nearly 65% of all Personal Lines insurance.
 
Your Independent Insurance Agent represents you, the client, first. They work to match your risk with the best carrier option available through the carriers and programs they represent. Each independent insurance agency contracts with the insurance companies, managing general agents, and wholesalers they represent. As of 2016 -2017, Independent Agents write premiums.

​The insurance companies include both national and regional brands. Examples of national carriers represented by independent insurance agencies include AIG, AmTrust, Chubb, Cincinnati Insurance, Liberty Mutual, Nationwide, Safeco, Travelers, The Hartford, Travelers, Zurich, etc.
 
Smaller regional carriers active in the Northwest include CIG, Oregon Mutual, Mutual of Enumclaw, Western National, etc.
 
Managing General Agents, MGA’s, look like an insurance company but are a targeted market program. The MGA program has the financial backing of an insurance company, but the MGA handles the sales, underwriting, and claims of the program. Examples of programs are AmWins, Deans & Homer, and Middle Oak.
 
Wholesalers are an additional layer of coverage options available to independent insurance agents. They have the flexibility to provide solutions for properties and coverage beyond the admitted markets’ appetite. When the standard markets decline a risk, the wholesale markets are the solution. Lloyds of London is an example of the carriers offered by wholesalers that most insurance buyers recognize.
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Who is helped most when buying from an independent insurance agent?
Real estate investors who are growing their business, ground-up new construction, value add capital improvements on older properties, or operate in areas of significant weather-related claim risk are more likely to find coverage through independent agents versus direct writers.
 
Direct writers prefer properties that are newer, completed, and occupied.

Buying Insurance Online sounds easy, just type, click and enter your credit card. Right?
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Recently I was shopping for insurance for a 12-unit multifamily rental property I own. While I am an insurance agent, and usually buy from myself, the current hard market was making it difficult to find a reasonable solution for my upcoming renewal. As a precaution, I decided to go online to see if I could buy insurance online better than what I could find myself.

​One night, while weighing my options, I took the plunge to buy insurance online and typed “apartment building insurance” into the search engine. A list of good-looking websites with pictures and words caught my attention. The first site that I clicked on, looked great. It had a very easy-to-follow intake form, requiring minimal information, and within minutes, I had a “quote.” This was followed by an email letting me know that someone would be in touch with me shortly. I was relieved, I had an affordable solution to my multifamily insurance challenge.
 
The next day, I called the phone number on the email I received. I navigated the voice message options, was unable to speak with a representative and was forced to leave a message in the general message box, a minor frustration.
 
Later that night, I decided to look to buy insurance online again. This time, I found a second site, provided similar intake information, and submitted my application.
 
The next day, I was able to call the second company to which I provided my information. I learned that they were primarily a personal lines agency and that I needed to speak with the owner. Fortunately, a short time later, the owner called me, and we were able to have an intelligent conversation about the challenging marketplace.
 
Recognizing that I was an insurance agent, he confirmed with me the challenges I was encountering were the same for him. He commented that this was the “hardest market” he had ever experienced. I decided to limit my shopping to not poison the market with too many submissions for my apartment risk. This happens when an underwriter receives the same application from multiple agents. My hope was that one of us would be able to generate an affordable coverage option prior to my approaching expiration date. 

​As time crept forward, my expiration date got closer and closer. I had nothing solid from my direct contacts, nor the second agent I spoke with directly. However, I had multiple emails with agent number one confirming coverage and answering questions, limits, carrier, pricing, and payment options. All systems go; I had a solid worse case offer from the first website quote. 

​Tick, tick, tick, with only two days to go, and no solid alternative offers besides the option from agent number one. So, I requested payment terms from agent number one so we could bind coverage. The price was more than I had hoped to spend but competitive. Coverage was sparse, but I was getting desperate. I emailed the first agent to see what we needed to do to bind coverage. A few emails back and forth, then he called to confirm the information I provided online the first night. A few minutes later, I received an email from agent number one explaining that my property did not qualify for the quote provided. 

You asked questions, I provided truthful answers. You provided a quote based on my answers. What changed?
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It turns out that the online site was an estimate. The actual company guidelines limited coverage for buildings with four or fewer units.
 

​The questions asked on your site asked how many units, and I answered 12. Your quote was based on the information I provided. Where is the disconnect?
 
Upon further digging, I learned that the site was a lead generator for lots of different agents, or in other words, a waste of time.
 
Days after the email conclusion with agent number one, I received a written letter via regular mail confirming that my coverage had been canceled. Huh? To cancel coverage, I first had to have coverage. I’m confused.
 
Fortunately, although it was last minute, 4:30 pm on the day my coverage ran out, I was able to place coverage with one of my other options. Coverage was limited, pricing was better, but the whole situation was very frustrating, to say the least.

​The internet is a great place to do research and become educated. But buying insurance online
is no substitute for working with an experienced provider who understands your situation and knows where they can provide a solution to meet your needs.
 
For your complicated insurance needs, I cannot recommend strongly enough that you schedule a call and talk with an experienced agent instead of buying insurance online to make certain you have someone working to solve your insurance needs.
 
Instead of buying insurance online, schedule a call with me by clicking the button below. I look forward to discussing your Property Insurance needs. 

What happens when you have a property claim? If you are like most real estate investors when buying a policy to cover your investment, the focus is on limits and price; after all, insurance is insurance, right?
 
In an ideal world, insurance would be insurance. It would all cost very little and provide more than you could imagine when filing a property claim. You would never suffer any pain or bear any responsibility. But like any dream, the reality is usually grounded in work you have to do to ensure your experience does not turn into a nightmare.
 
The following is a "nuts and bolts" look into a property claim and what happens when you have damage that requires your insurance company to pay so you can get back into pre-loss condition.
 
For this example, we will not dive into any potential underinsured instances or penalties, rather just the mechanics, beginning to the end. We will refer to the  claim as a "fire," but keep in mind that the property claim process will be the same regardless of covered peril.

​One of the two measures you need to keep in mind about property claims is time. The other is money. From the first day to the last day, you are on the clock. The insurance company does not owe you any more money for a job that you or your contractor completes in less time. If you or your contractors can not justify any delays, you will suffer more loss than necessary.

​To get paid what you are owed, you have to keep detailed records for every dollar spent on putting your property back together from day one. The carrier will likely not provide you any guidance and say that you can keep records however you wish. From experience, you can  save yourself a lot of pain by keeping detailed records and regularly providing these to your adjuster. Keep a ledger and EVERY RECEIPT! Doing so will allow the adjuster to recommend changes early in the process if needed.

​At the end of the property claim process, a reconciliation will be between your policy, the adjuster's estimate to repair your property, and your actual expenses. To get the full amount that the insurance company owes, you make sure your records are complete.

On day one of your property claim, for instance, your property is consumed in fire. The fire department spends hours putting out the  fire, cutting holes in your roof, hitting walls, cabinets, doors, etc., with an ax, and making sure everything is soaked in water to prevent any additional fire. Fortunately, no one was hurt.
 
The fire department ropes off the property to keep outsiders out of the property until their investigation to determine the cause of the fire is complete. The analysis takes three to four days. Then, each insurance company, yours, and your tenants investigate for evidence that points to the responsible party who will ultimately pay for the damage.
At a minimum, you can expect the property claim investigation phase to take seven to ten days.
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Secure the Property:
Now that the property is damaged and no one is occupying it, it is critical to control its entry. Failure to do so can prevent the fire marshall and insurance adjusters from determining the cause of the fire and can cause additional loss. Depending on the damage, securing the property can be tarps, plywood, door locks, a fence, a security guard, or a combination of these suggestions. Until the property investigation is complete, it must be kept secure.

​Now that a cause is determined, the assigned adjuster will set about adjusting the property claim. First, the adjuster will match coverage to the cause of the damage, then will confirm limits are adequate to pay for the damage.
 
During this time, the adjuster will meet with you and a restoration contractor to determine the damage's cost.

​The adjuster will present the repair estimate, a starting number used to adjust the property claim. It is not the ending point. The policy requires that the insurance company notify you within 30 days after receiving a sworn proof of loss of their intentions to pay for repair or replacement of your building.
 
The Valuation clause of your policy states that the initial settlement offer will be an Actual Cash Value offer. This number reflects the cost to repair the building minus depreciation. For round numbers, you can expect the amount to be half of the total replacement cost estimate.
 
If you purchased the Optional Coverage, Replacement Cost, you have 180 days to request your claim be settled on a replacement cost basis. The additional funds needed to make you whole will not be paid until the damaged property is repaired or replaced.

​The insurance company does not have any construction workers on staff to rebuild your building. So, it is up to you to interview and hire a competent contractor to do the work. If you elect to act as your general and hire out all of the subcontractors, make sure you have a firm

understanding of all the trades needed to get the job done. Repairing damage to a building is different from new construction, and not all contractors do insurance remediation work.

Once you and the insurance company agree on the repair estimates, you will receive your initial cash value payment. You or your contractor will need to get plans, apply for permits and line up the material suppliers and contractors to do the work.
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The initial work will be demo work so the reconstruction can begin. As the demo work is complete, additional damage may likely become evident. So the damage can be accounted for, and you can collect for the extra damage more easily. It is best if you or your contractor notifies the insurance adjuster right away.
 
Once the demolition is complete, the renovation begins. Depending on the amount of damage, it will likely be a hive of activity; framing, windows, plumbing, electrical, drywall, texture, paint, flooring, cabinetry, finish carpentry, etc. In a tight market where labor is in short supply, there will be periods where nothing happens while waiting for the next needed trade to perform the next task. This process is normal.

​Once all of the work is complete and the certificate of occupancy issued, you can now get back to business. To complete the property claim settlement with the insurance company, you must present your final accounting that details all the payments you made and receipts for the expenses. The insurance company will reconcile the amounts paid to date, estimate, change orders and bills you submit, less your deductible to determine how much the insurance company owes you.

​If your policy provides the Replacement Cost Options, you are owed new for old. If your damaged property was builder-grade finishes and you rebuilt with custom finishes, you will be responsible for the difference in cost. If your records are detailed, it will be easier for the insurance company to reconcile and make payments. If your documents are unorganized, you will likely get some pushback and work harder to get what you are owed.

The definition of building on a Commercial Property policy includes items used to service or maintain the building, including appliances used for refrigeration, cooking, dishwashing, or laundering. If you have an office on the property or a supply room where you keep supplies, for this and other properties, you will need to have it accounted for and covered under Business Personal Property.

The property claims settlement process follows the initial steps in the description above. Rather than engaging a contractor, you will have to itemize and provide proof of ownership for all items lost. The itemization can be in list form. Establish proof of ownership with receipts or photographs. For the replacement cost of each item lost, you will need to contact retailers for the price.
 
Most insurance companies work with buying services and may be able to replace the item for less. If this is the case, you need to make sure the item is the exact model you are owed and not a lesser quality item.
 
Once you produce the list, the insurance company will provide you with an Actual Cash Value initial payment like the steps above. Once you have replaced the item and give the receipt, they will provide the difference to make you whole.

If your policy provides for Business Interruption or Loss of Rents, you will have an additional claim for lost income. Ideally, you have Actual Loss Sustained for 12 to 24 months. If you have a specific dollar amount limit and coverage with a fraction or coinsurance limitation, your attention to the clock is critical. You don't want to run out of money because your repair took longer than your policy limits provide.
 
Remember, Record keeping is crucial to get your property claim appropriately paid.
 
The carrier will request current leases to determine the amount owed. If a space is occupied, you should collect the rent you would have if damage did not occur for the rented space. If a space is vacant, there is no loss of business income owed. From the current leases, the carrier will pay after the loss has occurred. This process is the reverse of what you receive from your tenant, due on the first of the month.
 
Payments will likely be included with other amounts owed. The carrier should provide you with an itemized list of what they are paying for, but it can be difficult to keep accurate records given the initial discount applied for Actual Cash Value. When you have questions, get answers.
Please don't wait until you are eighteen months down the road trying to sort it all out.

As mentioned at the beginning of this, the potential penalties, etc., have been left out. For details on the following, please click the link:

• Coinsurance Penalty
• Building Ordinance or Law
• Equipment Breakdown
• Vacancy