Out with the Old, Bring in the New!

| January 04, 2022
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Out with the Old, Bring in the New!

Happy 2022 to you, and let’s all hope that 2022 brings far more opportunity and freedom to us all as Covid-19 vaccines and therapies, questionable lockdowns, and simply 2021 as a pivotal time in our lives exits the stage and leaves us with a recent history from which we can learn as we move forward into 2022.   

Insurance companies were also glad to see 2021 exit!  But, not necessarily for the angst of this past year but mostly for the opportunity to bring more choices to landlords as we all look for ways to protect ourselves from more and more types of claims in times when tenants may look for the alleged “deep pockets” for relief of their financial woes. This will hopefully bring these companies greater market share! 

So many of the companies have made available additional insurance protection in their landlord and apartment property insurance programs, yet most of us keep the policies we have had for years and years and on which we just keep paying premium.  It’s time to update or re-write your policies! There are so many newer coverages that are available that we made it our New Year’s Resolution to let you know what is available to you at mostly very little additional cost.  

Much of what we want to outline and present to you is partially available with some insurers, but not all, and the upgrades insurers are providing are trending toward incorporating more of these seemingly ancillary coverages but which are really very important for the most part.  So, here we go:  A few of our favorite changes of 2022!

125% Extended Building Replacement Cost:  A coverage you should be used to seeing on your 1-4 unit properties, it has been available with just a few insurance companies offering apartment insurance programs, and this is catching on with the bigger players in this market space.  By now, most serious Apartment Building Insurance programs provide for 125% of the policy’ building limits in the event of a large claim that may exceed the stated policy limits.  

  • Ex:  You have $1,000,000 in coverage on a building – the value having been established using accepted replacement cost software valuations – and there is a total loss; you also have the 125% Extended Replacement Cost endorsement.  You find out that it will cost $1,150,000 to rebuild; the 125% benefit then kicks in and hopefully will coverage all of your expenses.  In this case, you would have $1,250,000 and adequate protection.  

Rental Income Insurance Extension:  Likely, you have this coverage already, but also likely you are limited to 12 months from the date of an insured claim.  Now, companies are beginning to offer extensions of rental income up to 24 months from the date of loss.  This coverage is not to protect you from flakey tenants or Covid-related rental income losses, but it does provide protection in the event of Fire, Sudden & Accidental Water Damage, Vandalism, and other insurable property claims.  

  • Ex: Your tenant may cause a cooking fire or accidentally blowup a portion of your property by tossing an unextinguished cigarette butt near an old propane tank; it happens!  Once the fire is extinguished and damage is assessed, your tenants will move out while the property is repaired.  If the repair time is a few weeks, you generally have enough coverage and your tenant will return.  If the property is severely damaged, the lag-time to complete the repairs can run well over 12 months.     

Bed Bug Kissing Bug Liability Coverage:  This type of claim is gaining a lot of traction, and an updated or newer policy forms may provide coverage without having to fight your insurance company over whether or not coverage exists.  This is a Liability (not Property) coverage which provides you with defense and coverage for Bodily Injury and Medical Expense claims due to infestations for which you are deemed liable. Limits for this generally start at $50,000 with higher limits available (for more premium!).  Still, a nice coverage to have and not terribly expensive.

Cyber & Data Breach Coverage:  Tenants increasingly are being encouraged to pay rent online, and their personally identifiable information is kept on computers.  Computers are connected to the internet, and thus the gateway is provided for hackers seeking access to this information in your safekeeping.  While there is a fair amount of uniformity, Cyber and Data Breach policies will provide varying coverage and policy limits from company to company. This is a coverage to ask for, as the information you keep is your responsibility to protect.  A breach can cost you thousands of dollars!  This is a great coverage that is now being offered as an endorsement to many companies’ policies, which brings this coverage to you in smaller increments and in smaller premiums than those charged to businesses.

Water Back-Up and Overflow protection is a coverage that has been around for many years, but the older policy forms (5+ years) may not offer this protection.  When they have, they generally provide smaller limits of coverage, but these types of claims can easily run into $40,000 for the cost to repair the damage and as well as deal with asbestos and bacterial issues that often come with properties over 40 years old – very common in Los Angeles County and also common in Orange County’s older neighborhoods.   Many companies are now offering limits up to $100,000 or greater; your choice of coverage and company, in this case, might be dictated by the type of properties you own.   

2022 is bringing a lot of changes, and as we have shown, this includes potential improvements to your insurance contracts. A great value to you – beyond the changes we highlighted – can also be found on Broadening Endorsements which effectively combine many coverages into one endorsement. These broadening endorsements provide some amazing additional protection for a very nominal cost; they offer – in many cases – over 25 additional types of coverage in higher and smaller limits which are quite handy to have.  

Apartment Property & Liability Insurance – though a direct cost to you – is about preserving your capital as well as your property and about maintaining your cash flow. Be smart about your coverage and review your policy with your agent to determine if you need to endorse or re-write your policy for maximum protection. *Tip:  Double your existing deductible and with the savings you can pay for a lot of these increased coverage enhancements suggested above!    

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