Procrastinators have insurance problems in two areas:

(1) buying an insurance policy, and

(2) switching to a better insurance policy.

Most investors ‘leverage’ their money by using a mortgage when they buy a rental property. And because every mortgage lender requires insurance, it is almost impossible to have both a mortgage loan and also no insurance on that property. But a ‘cash buyer’ can do as they please.

In one actual case, a cash buyer ordered the insurance, but the closing date was suddenly moved up by one week. Rather than call the insurance agent to change the effective date to the new closing date, the buyer decided that the chances of anything really serious happening was very small, so he knowingly decided to go without any insurance for 7 days. You guessed it ! There was a fire during the 7 un-insured days, and his decision cost him $82,000 out of pocket.

The second mistake that procrastinators sometimes make, is delaying a change to an insurance policy with better coverage. Yes, there was a time 30 years ago, when many insurance companies charged a “short rate” penalty on any refund made during the policy year. But today, few if any insurance companies continue to do that. And, even with a penalty, the advantages from better protection will make an immediate change worth-while.

If you have obtained a quote from another insurance source, and the policy being offered provides more coverage on the building, that alone can be a major improvement. Because of construction demand from those California fires and higher tariffs on lumber from Canada, lumber alone has increased in cost 60% over just the past 6 months. Of course, this says always look at how much your home is being insured for . . . not just the price of the policy.

Another factor is coverage features and protection levels. Look at things like the liability limit, whether or not you have…or would be getting, coverage for building code changes, and any other improvements that are included in the new proposal.

The standard landlord’s policy pays to re-build the same house. Sounds O.K.? The problem is that the building code is constantly being updated, and the extra cost to comply with the new code, is an “optional extra” with most companies. In another actual case, a smaller townhome had a fire and the cost to meet changes required by the building code, was over $35,000.

Many owners will say “I’m going to wait until my next policy renewal to change.” If something really serious happens, they’ll wish they hadn’t waited. And some insurance companies can re-set the anniversary dates on a new policy, to be exactly what you had before. That way your mortgage lender will have the impound money at just the right time.

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by Clark Sanchez

CLARK SANCHEZ has been an Arizona insurance agent for over 40 years and has been a Vendor-Affiliate with AZREIA for over 16 years. You can contact Clark if you have any insurance related questions at clark@clarksanchez.com or (602) 803-2179