Landlord Insurance And The Independent Agent
Recently, Jeff Bair, head of merchandising and business development for Foremost Insurance, dropped by the Insurance Journal‘s How To Write podcast to discuss the particulars of landlord insurance and what the independent agent’s role is in writing an effective policy.
Bair discussed the typical types of coverages included on a landlord policy as well as endorsements, limits, future premium projections, and more. The entire podcast is worth a listen, but here are some of the highlights that you’ll want to take note of as someone who might have landlords in your clientele. (Foremost Insurance covers around 500,000 landlords throughout the U.S.)
How Landlord Insurance Policies Work
According to Bair, “Usually what you are going to see is either a dwelling fire one or a dwelling fire three policy. So that means the customer is either getting Named Peril protection or comprehensive coverage. Beyond that, you’re looking for coverage for the dwelling, other structures, maybe personal effects, and certainly loss of rents. Now you can get those in a package or purchase them on bundle.”
Bair notes that loss of rents “is particularly important to landlords because when they do have a loss that prevents the property from being occupied, they want to have that rental coverage in place.”
Premises liability is also an important consideration. This pertains to whether the landlord will be staying on or off the premises. “Next up would be coverage in the event of a total loss,” Bair adds. “Are they looking for ACV (actual cash value) which is what we offer at Foremost, meaning that in the event of a covered loss, the policyholder receives the amount on the declarations page? Or is replacement cost coverage what they need?”
Personal liability protection is yet another endorsement a landlord will want to look in to, “And when you think about that, it’s typically thought of as libel or slander or defamation of character, but it’s also for landlords — wrongful eviction and wrongful invasion. Two important covers there.”
Finally, if the landlord offers property with furnishings already in it, then he’ll want to consider personal effects coverage as well as any replacement cost that might be required.
Limits — The Lows, The Highs, And The Minimums
Bair’s company insures landlords with properties for anywhere from $25,000 to $1 million, but when pressed to define a “minimum,” he had this to say.
“I’m always going to have the same answer for minimum limits, and that is, policyholders need to talk to the agents. They do a good job of evaluating the risk, figuring out what the customer wants. Is it market value? Is it replacement cost? … Our market is one to four family homes, so if it was a larger number of families, six to 10, you’d probably see limits above $1 million. Country-wide, our average is right around $130,000.”
Asked if rates were about to go up, decrease or flatline, Bair said that he saw them “continuing to go up a bit, but that’s probably because of where weather has been.”
“I think everybody knows there has been a lot of instability [and] difficulty predicting what the weather patterns are going to be. A lot of storms … certainly the big storms in Oklahoma, superstorm Sandy … it’s very difficult to predict what’s going to happen in that space. Even when you look at current indications, right now it’s been, knock-wood, a good hurricane season so far, but that will also drive some of that predictability in a future rate change.”
The most vulnerable areas for rate growth, he admitted, were “the coastlines,” both east and west.
Finally, What Is The Independent Agent’s Role In Writing Landlord Insurance?
“The role of the independent agent is to be a person who does a good job of educating, but also good needs satisfaction selling. Have the conversation with the insured, understand what their risks are, what their exposures are, and what their needs and wants are to get the right policy in place. I think it’s incredibly important that they [agents] do [understand the coverage].”
While home ownership is ticking upward, there will always be a strong market for landlord insurance, but the coverage is only as good as the specific protections that are in place, and that must be tailored to each property owner. As Bair noted, you the independent agent have an incredibly important role in making sure landlords have the information needed to make the right decisions.