Many real estate owners have put together a varied portfolio of properties; such as houses, apartments and commercial properties. This has led them to want to insure all of the properties together with one policy with varied degrees of success. While it is all real estate, why can’t a person combine these with more success?
The main issue is the appetite of the various insurance companies. Most insurance companies base their underwriting issues on the carriers. The underwriting profits of insurance carriers are extremely narrow: usually 5 % over average and nonexistent in a bad year. To counter this margin, insurance companies have very tight underwriting requirements. Although commercial, rental homes and apartments are all real estate; they have distinct differences in how they are underwritten.
On a rental home, most insurance companies will be concerned about the updates and house keeping of the property. What is the age of the roof, what is the status and type of wiring? Have there been updates to the heating or plumbing systems? The more these are maintained or updated, the less propensity to have a claim.
For an apartment, the update questions are the same but the maximum claim is probably much larger than a single family home. This requires a different capacity for claim from an insurance company. Also the costs of the updates to the apartment complex owner are much larger, requiring budgeting or refinancing to do an effective job. Occupancy and type of occupancy also comes into place. The more vacant units that may be unprotected can lead to a high change of claims.
On commercial property, updates are still important but the type of tenant comes into play. In retail, there may be restaurants with open grills or deep frying, creating a fire hazard. Or in a commercial property, the tenant may be a manufacturing business using hazardous materials or a hazardous manufacturing process. The insurance company will want to be able to underwrite the tenants as much as the property itself.
Prior claims always come into the picture for any type of real estate, but carriers will want to know what safeguards have been installed after a claim to limit future claims.
As to be expected, newer buildings with more current updates and less hazardous tenants will be treated more favorably by an insurance carrier.
Ramey King Insurance, established in 1881, is an independent, local Texas insurance agency committed to providing individuals, families and businesses with steadfast risk management solutions. For well over a century our team has helped to protect your assets – whether they be companies, vehicles, property or loved ones. To learn more about our Texas insurance agency, what we do and how our services can be of benefit to you, give us a call today. You can reach a Ramey King Insurance agent at 800.453.9691 or by filling out the quick and easy form on this page. We look forward to hearing from you!