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October 10, 2019

69. The Ins and Outs of Insurance and Selecting a Broker

Today we’re joined by Shaughn Daugherty, multifamily investor and vice president at Epic Insurance Brokers.

In this episode, Tom and Shaughn will cover obtaining insurance for your property, when you should start looking for insurance during the acquisition process, what questions you should be asking insurance brokers, what you need to have ready when getting a quote, how to make sure you’re properly covered, and more.

What Types of Questions Should an Investor Ask a Broker?

Investors need to look for brokers with a track record of working in the space, possibly through references and referrals. Insurance will come into play and is necessary to do business. The broker needs to be involved early in the process and be willing to walk you through the language of the policy with your best interests at heart.

When is the Ideal Time to Get Involved with Insurance?

Once you’re starting to plug into the numbers, working on pro formas, and having conversations with PMs, you need to begin talking to a broker. When buying a property, you don’t always want to continue with their previous coverage for many reasons.

What Info Does the Investor Need to Bring?

First, you must know what type of property it is and what will the property be used for. Investors also must know the year was the property built, the construction type, and any improvements that have been made to the property. Also, have there ever been any claims on the property?

What Does Proper Coverage Look Like?

The answer to this question really begins with choosing the right broker for you with your best interests in mind. Building coverage and business interruption/business income coverage are some of the first things to look for. Business income coverage, especially important in multifamily, covers you in the event of loss of rent due to an externality. An additional clause can cover this loss of rent for a year, 18 months, or 24 months. If a building burns down, you need these enhancements to cover a long term rebuild. Building ordinance coverage, especially in an older building, will allow you to have extra funds to bring the building up to code specifications.

How do You Know You’re Getting a Good Price?

Hopefully your broker is active in educating you. You could also get other brokers involved to compete and offer different options. Ultimately you must be proactive in finding a broker who is willing to be open and collaborate on pricing. They may even have some analytics and benchmarking where you can compare rates and coverages with competitors.

Other Considerations

Insurance can be regionalized based on the experience of losses. Florida may have an additional policy for wind and hurricane damage, San Francisco may have earthquake coverage.

Umbrella policies can be based on an entire portfolio or on a per-property basis.

For larger syndicators, cyber and data breach insurance is important. Bank accounts and social security numbers make you vulnerable to data breaches and insurance can help with notifying you and investigating the cause.

If you’re growing, you need a broker who can grow with you and understands your vision.

Shaughn’s Thoughts About Accounting, Tax, and Tech

As a real estate investor, understanding the difference between repairs and improvements is important, especially when considering depreciation.

When bookkeeping for a smaller portfolio, Shaughn notes that spreadsheets can be a great tool. His favorite pieces of technology are Calendly and Grammarly, and we love and use both of these platforms at The Real Estate CPA as well.

To get in touch with Shaughn, his email and phone number are contained in the podcast audio.

Learn more about Shaughn and his work: epicbrokers.com

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