Hi. Happy new year folks… I just found out the liberty mutual fire insurance I had used for years on my single family rental house decided they no longer offered fire insurance on rental houses. They stopped coverage in spring! The assistant lady said “nothing you did wrong, liberty mutual just stopped offering fire insurance.” Well we need insurance on our rental but won’t be using this company.

If you own your rentals debt-free, a different action plan is to self-insure. I've been doing this for over a decade without a problem. To make it easier do the following:

1. Make anything electrical is up to code and/or as safe as possible. Pay a Master Level electrician to do this and to make said repairs and/or upgrades. Write down his advise on common causes of electrical fires.

2. Establish a business relationship with a contractor, especially one who does his main business with rental property.

3. Keep in a savings account a "future repair fund" in the amount you feel comfortable with. The monies you do not pay the insurance company can help fund this fund.

4. A few times a year, physically visit the inside of your property to make sure tenants are doing what the master electrician stated.

5. Use a month-to-month rental agreement as it make it easier to evict a non-cooperating tenant.

Shelter Insurance (best, cheapest, strict guidelines)

Foremost (decent, medium expensive, looser guidelines)

Aegis (okay, most expensive, loosest guidelines I've found to date)

Right on Rick, [IN]

I went self-insured on my SFH's (rentals) for many moons,

and still do on my Primaries.

Being a retired Firefighter, Fire Inspector and

Automatic Fire Sprinkler Installer, I made a list of

do and donts and sang the song of Fire Safety to all

tenants and then kept them on a short leash.

ITCANBEDONE.

Before you self insure, consider the liability insurance portion. If someone gets stabbed by a falling icicle on Friday the 13th some ambulance chasing lawyer is going to come after you for $1M.

I have a variety of insurers, but I would suggest at least liability. I know it is a rare occurrence but it's nice to know you are covered.

Been with State Farm for decades. Shopped our policies just last week...SF still giving us the best rates.

Ted [N.J.]

To answer your questions of:

"In the rare case tenants burn totally burn down the house via recklessness or smoking, how would you prep for that?"

Your playing the odds which are in your favor. First you have to suffer a fire "which totally burns down the house." That's very rare if your electrical system has been inspected and repaired by master electrician.

Second, it is rare for total destruction of a building to occur. This is where your good business relationship with your contractor comes in and your "rainy day fund."

About the accident scenario, again the odds are in your favor:

First, make sure buildings are up to code AND keep them up to code, this is where your good business relationship with your contractor comes in. An accident has* to be your fault in order to be sued!

Second, I'm not a big-time operator so the odds a shyster attorney will come after me is very small. Since I'm self-insured, said shyster will notice there is no low-hanging insurance fruit to pick, so the odds of said shyster getting paid is even lower.

Third, from personal experience I have had one small kitchen fire, a "fall," and a tree limb fall on a small, outdoor swimming pool. The first was easily handled by the fire dept. and contractor and tenant's money. The second was easily handled by showing the tenant the passed inspection report by the building commissioner so go pound sand and by the way your month to month lease is terminated thirty days from now. Third, told the neighbor that his insurance company should handle that instead of blowing him off.

Last, make sure all communications will all parties is in a printed format.

*Now about that asterisk above. I live in a good state to be a landlord in and every repair, remodel, etc. my contractor has done has passed the local building commissioner's inspection so he is known for being a quality man. So let's go through a scenario in that: something bad has to happen, it has to be your fault, and it has to be worth the money to an attorney to go after you once everyone finds out your self-insured. The odds, though not zero, are in your favor.

Best of success to you in your rental endeavors.

I have heard from an agent or two that they are using drones and/satellite images to look at the roof. If they see repairs or patches, they say the roof is in poor condition and deny coverage.

I used to have over 20 policies with Farmers Insurance. But because of their lack of professionalism, I'm down to 12 policies for a dozen apartment buildings. Recently I got a letter that since I no longer have a Drivers License, they are going to cancel my personal Umbrella policy. So I contacted my agent of 20 plus years. He said he would make things right.

So before January 10th, when 4 of my policies come up for renewal, online I saw that my personal Umbrella policy was cancelled 11/04/2024. Because of no drivers license. I can have up to 18 Single Family Homes covered by this Umbrella Policy.

I've had always had a valid drivers license since 1976, I provided to Farmers a Copy of my Drivers License, due to expire in 2029. A copy of my wife's, children and a Manager too.

They promised by Thursday I'd have a new police in force covering me.

Rick, thanks for your detailed reply. I’m certainly going to find a master electrician to do a full inspection and set of recommendations. (Note: I’m looking at another rental house to buy - makes sense to avoid the know-nothing general housing inspectors and go with specified electrical, plumbing, etc. inspections?)

As a house burning completely down is rare, if up to electrical code, it makes sense to not dwell on that remote possibility. And of course most insurance companies don’t pay out full claims even after deductible.

What do you say about getting coverage in order to take out a mortgage loan? Get temp coverage and then cancel it later?

Mike, how much coverage do you get for personal injury? State Farm’s standard rental policy is 1,000 a person which seems really low.

Robert in Ontario, Uponor pex system sounds very intriguing. You did the installations yourself?

Ted, do NOT cancel insurance on a place that has a mortgage. They will ding you hard. I have never seen a mortgage that allowed you to have no insurance. They want protected and the property is the collateral.

Now maybe a hard money loan or a commercial loan with lots of properties, but I still doubt it is a good idea.

You can have the insurance low enough that it covers only the loan. I know a guy local that does that. Saves him money. He had a fire and decided that if the tenant's insurance didn't cover it he would let the house sit idle, or sell it to someone else.

I do not think he has a slush fund set up for unexpected damages like that.

Personally I have too much insurance. I have raised my deductibles and checked on what they said the house was worth to save money. I have considered self insuring on a couple of the places I own outright, but I am a chicken and have never followed thru.

Ted of N.J.

Regarding inspecting a property prior to possible purchase I due the following:

First, what is the best possible rent you can get from this building? What are the known expenses?

If not occupied, I go through and inspect and if it passes my inspection, then I'll have my contractor - the one with the good business relationship - take a look. Then we'll compare notes. If nothing else, it is a good learning experience. Then I'll ask the neighbors about the property and if that is OK, then the Building Commissioner's office to see if there are any concerns with said building. If the above checks out then it comes down to basic math; how much rent I can expect to receive vs purchase and fix up costs.

If building is occupied - this is my favorite way to purchase - set up a date with seller and tenant to look at the building. I prefer the seller not be there, just the tenant and I. I ask the tenant about the building and the tenant's ability to pay. I never have had a tenant not willing to show any flaws - real or imagined - about the building or the owner. If that passes, then I'll meet with the owner and have my contractor take a look and we'll negotiate price.

After looking at a building, I'll go to a Mom&Pop restaurant to review my notes and run the numbers. That's about it.

Good luck with your successful rental progress.