Strange Letter From With Demands From My Insurance Company
I've received a letter from my insurance company that states that their inspector has visited my properties and has made a list of "recommendations" which I must implement within 60 days if I intend to continue insuring my properties with them. I've been involved in REI a relatively short time, but I've been around other RE investors for over 10 years. I've never heard of anything like this. And I would probably have no issue with this if the recommendations were for valid, necessary repairs. But this guy has complained about things like some of the paint chipping on the outside of one of my properties, which he now insists I must completely repaint. I take great care of my properties. And to have this guy do some sort of unannounced inspection and make these ridiculous demands when he’s unable to find anything really wrong, frankly seems petty and unprofessional. Is it me, or is this guy on drugs? Any ideas on what I should do?
Don't know the type of policies, or properties you have, but we all know that tenants will sue for a variety of reasons.... chipped paint? Maybe it's lead based. CaChing. Loose railings? CaChing. Friable asbestos? CaChing?
Inadequate lighting in common areas? CaChing. An improperly sloped sidewalk? Big CaChing.
In my opinion, just make the repairs, take a photo of the repairs, send it in and forget about it.
Insurance companies have the right to do inspections at any time. You state that you have been in real estate a very short time. This could be one reason they are just making sure you are keeping up with their guidelines. I have seen people buy RE and because of inexperience the place burned down within a month of purchase. I bought a house in Jan2004, because the house was frozen, due to our weather in Jan and Feb, I couldn't have the repairs started until late Feb , early March. The Ins. Com. called me about the "vacant property", due to an inspection. I had to explain the situation, I am almost finished with the house, I have insurance still, it all worked out.
So call and TALK to someone in a professional way
Lori
[addsig]
In certain areas, Insurance companies would like to find cause to leave the risk to other companies.
I think you know the answer. Do the repairs or get another carrier. See if another insurance company will issue a policy and at what costs.
Unfortunately, welcome to the "hard market" for insurance on non-owner occupied property. The letter you received is very common presently. As others have stated, address the issues (founded or not) or move on to the next carrier. Find an Agent that is familiar with REI, or better yet, is also an investor. Good luck, Tim
norrist, is exactly right I have been an insurance property restorer for 11 years and it is a battle to get them to give a dime right now because of the hard market. I recently had my car broken into and my insurance canceled me after 11 years with the dame company. The #'s where 21k per year X11years=231k
1 loss x 4k=CANCELED
It is just the way there market is geared right now.
This is becoming more and more common in owner occupied as well. Insurance companies are looking for all possible avenues to reduce the risk that they might actually have to pay a claim. Where houses are concerned, a SMALL part of the blame can be put on homeowners who file claims for things I never would have dreamed of. Peeling paint = possible future water damage to siding; less than perfect roof = more vunerable to wind damage during a storm. Both could also possibly lead to moisture inside the house than then results in mold (insurance company nightmare). I'd bet that the fact that you're an investor had almost no bearing in this. This company might have a history of being nitpicky. You can do a quick internet search and find out. I've read reports of people who have NEVER filed a claim and holding the same policy on their hours for 20+ years sent similar letters, or dropped entirely because of their fica score.
Not in defense of the insurance companies, but property insurance has been under-priced for many years...it is no longer the "loss-leader" for insurers that it once was.
Tim
I don't think it has been "under priced" it has been market driven and I know few people that have ever had a claim in their lifetimes.
I have had many homes and paid 10's of thousands and had two claims for minor theft totalling $500 QUite a profit!
My contractors insurance has doubled and we've never had a claim...
Personally I would shop and do every couple of years. With one exception I hasve no loyalty to any insurance company.
[addsig]
The insurers (again, not in defense) in the last few decades consistently have run loss ratios over 100% (even higher if expenses are factored). Though Stockpro's experience is not unique, it only takes one dog bite or "small" fire to wipe out the margins for those of us "claim-free". We even saw years of home and other property rate decreases in the mid-90s, even though the carriers were bearing the higher loss expenses...thus my descripton of a "lossleader"...
I just had a similar situation to that of Alexlev, except mine was a letter of cancellation followed by a refund check. The reason they stated in the letter was the "condition of the roof" -- no further explanation. I called and asked them to please explain, as the roof is less than a year old. Then they said it was because the backyard was kind of "messy". I told them that the only "mess" would have been during a period when the property was being refurbished. They finally agreed to send someone out for a re-inspection last Thursday -- we’ll see what happens. While all this was going on, I talked to a few other insurance companies, only to be told they wouldn’t even quote a rental property unless I agreed to carry my primary residence and autos with them. As Norrist states it’s definitely a "hard market" right now!
That's happened to us as well, Mcole. You should find an Agent familiar with (or also an investor) with whom to work.
Interesting that mcole has mentioned the roof, because that's the biggest issue I have with this letter. I took a time-out last night and came back to it this morning. Some of the points in there are perfectly reasonable. They're things I intended on doing anyway, but as these properties are relatively new in my portfolio, I was focussing on fixing other things first.
But their comment on the roof was, "The services of a qualified contractor needs to be obtained to properly replace the deteriorated roof." What deteriorated roof? Granted it's not brand new, but I've had two certified inspectors look at it, and both have said that it has at least another 5 years of life in it.
The chipping paint I mentioned in my original post actually has me scratching my head. The properties are all brick, with aluminum windows. I can't for the life of me think where there might be pain on the exterior of the building.
And of course they want all this done within the next 60 days. Suddenly this insurer doesn't sound like such a good organization to work with.
Happened to me.
They gave me about 10 recommendations. I did 5 of them (well enough to shut them up), partially did 2, and made an explanation for about 3 of them (something like we're going to worry about that next spring).
I'm still insured and I haven't heard from them since. Total cost...about $600.
Hibby is right on. Do your best, send them documentation on the roof inspections and plug away. Chances are your next insurer will be just as "picky". Good luck and keep us updated...
Tim