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Risk Management

Mitigating Loss with Smart Home Technology

Be Proactive and Avoid Costly Claims by Jason Jones As a property owner, you are likely familiar with the benefits of smart home technology. But beyond the convenience of remote controls and automation, these systems can also play a critical role in mitigating loss at your investment properties. The right technology can help you avoid costly incidents that could otherwise lead to major repairs or liability claims. Smart Water Leak Detectors Water damage is one of the most common and costly issues for property owners. A leaking pipe or appliance left unchecked can cause significant damage to walls, floors, and foundations. Fortunately, smart water leak detectors are available to help you catch these problems before they escalate. There are two main types of leak detection systems:  »            Sensor-based systems are affordable and easy to install. They use sensors placed near high-risk areas, like under sinks or next to appliances, and alert you if they detect moisture. Some models offer push notifications to your smartphone, while others make an audible alert.  »            Water main systems are more advanced and can detect changes in water pressure throughout the entire property. If something unusual is detected, these systems can automatically shut off the water supply, preventing further damage. Though more expensive, if you are concerned about things like frozen/burst pipes, these systems are a worthy investment compared to the potential cost of severe water damage. Smart Thermostats For investors with vacant properties or homes undergoing renovation, smart thermostats can be a game changer, especially in colder climates. One of the biggest risks for vacant properties is frozen pipes, which can burst and lead to costly water damage. A smart thermostat allows you to monitor and control the temperature from anywhere, ensuring your property stays warm enough to prevent freezing, even if you cannot be onsite. This way, you do not have to guess whether your home’s heating is holding up in sub-zero temperatures. Plus, you can save on energy costs by adjusting the temperature as needed, rather than keeping it unnecessarily high for extended periods. Smart Sump Pumps Flooding is a major concern for investment properties in high-risk zones. Smart sump pumps and backups can alert you to issues before they cause extensive damage. If your property already has a sump pump, you can upgrade the current setup by installing a smart primary sump pump. These systems can send a text or push notification to your smartphone if high water levels are detected, indicating that the pump has either failed or lost power. This early warning gives you time to take action and prevent the worst-case scenario from occurring. In addition to primary sump pumps, there are two options for smart backup sump pump systems:  »            Smart battery backup systems automatically kick on to handle incoming water if the primary pump fails, is overwhelmed, or loses power. A common issue with older models is that the batteries degrade over time, and you might not know there’s a problem until it’s too late. With smart battery backups, you can monitor the battery’s condition at any time. The battery charge on these systems can last anywhere from a few hours to several days depending on the model and conditions.  »            Smart water-powered backup systems use the main water supply to pump out floodwater in the event of a power outage. For property owners who are concerned about relying on battery life for lengthy periods, these are a great option as they do not require anything but pressure from the water main to operate. However, as these systems rely on the home’s water supply, they can be costly to operate for extended periods. Like battery backups, these are equipped with wireless smart alarm systems that alert you to issues such as pump failure or incoming water. Smart Carbon Monoxide Alarms Carbon monoxide (CO) is a silent killer, and as such, it is important to have a reliable detection system in place to keep occupants safe. Smart CO alarms can detect harmful gas and send real-time alerts to your smartphone, so you will know if there is a problem even if you are not physically present at the property. Some smart alarms can pinpoint the specific area where carbon monoxide is detected and even contact monitoring centers, which can then notify emergency services, if needed. Combination smart home sensors are also available on the market and can detect carbon monoxide, smoke, and fire. Both battery-powered and wired options are available. Smart Locks Whether you manage short-term rentals, vacant properties, or homes under renovation, smart locks are an effective way to keep your property secure. With smart locks, you can monitor access in real time, receive alerts when someone enters or exits, and even remotely lock and unlock doors. There are several types of smart locks on the market:  »            Deadbolt replacements that completely replace your existing lock.  »            Deadbolt adapters that modify part of the existing lock system.  »            Keypad locks, which are simple and allow access with a code. Some models provide backup keyholes in case of battery failure. For vacation homes or rental properties, smart locks can make guest access easier by allowing you to set temporary access codes for visitors such as contractors or cleaners. Just be sure not to reuse codes and deactivate them when necessary. Some smart locks also track who enters and when, providing helpful records in the event of a security incident. Smart Lighting Vacant properties can be a magnet for vandals or burglars. Smart lighting is an easy, low-cost way to make your property look occupied when it is not. By installing smart plugs or bulbs, you can remotely control lights or set schedules for them to turn on and off at random intervals, giving the impression that someone is home. Some systems can be integrated into existing smart home devices while others offer their own applications. In Conclusion While smart home technology provides convenience, it also allows you to take proactive measures to prevent loss and avoid

Risk Management

Navigating the Evolving Insurance Landscape

A Guide for Real Estate Investors in 2024 By Jason Jones Property owners across the country are grappling with the aftermath of another intense year for the insurance market. Extreme weather events and large-scale natural disasters have caused the insurance landscape to evolve significantly over the last few years. But what does that mean for real estate investors? Let’s start with a look back at a few of 2023’s most impactful losses. Recap of 2023 Events From January through March, a staggering 466 tornadoes were reported, mainly affecting Southeastern states like Mississippi, Louisiana, Arkansas, and Alabama. The trend of severe weather continued in the spring, with more tornadoes, hailstorms, heavy rain, and high winds, collectively contributing to approximately $25 billion in damages. In late summer, wildfires on the island of Maui tragically claimed the lives of over 100 individuals and losses were an estimated $5.5 billion. Shortly after, Category 4 Hurricane Idalia made landfall in the Southeast, triggering severe flooding and losses totaling $2.5 billion. Insurance Market Response  In 2023, real estate investors faced significant price hikes with general rate increases and insurance to value (ITV) minimum increases. Rising building and material costs continued to be a major concern for insurance companies, mainly driven by large-scale natural disasters like wildfires, which impact material availability and the supply chain. Beginning in 2022, many insurance companies continued to pull out of areas such as Florida, Louisiana, and California. Unfortunately, some were forced to shut down operations altogether, not only because it was no longer profitable but because there was concern that one extreme weather event could cause irreparable financial harm to all parties involved. Other companies identified risks they are no longer willing to insure. For example, many carriers now limit or exclude coverage for more frequent and predictable risks, such as Aluminum or Knob & Tube Wiring — two electrical systems that are serious fire hazards. In addition to more exclusionary language, these methods also resulted in higher deductibles.   The good news? The market is beginning to stabilize. The dramatic changes experienced in 2023 were insurance carriers establishing acceptable rates, deductibles, and coverages for viable businesses moving forward. Although costs are expected to continue rising, the rate at which they do is predicted to slow in the coming year. However, significant weather events will always affect the landscape of the insurance market. Takeaways For Real Estate Investors Consult Your Insurance Provider Engaging in open discussions with your agent or broker is the best way to identify exposure, address concerns, and explore additional insurance products. Don’t hesitate to reach out if you have questions or need advice. Choose Appropriate Coverage As an investor, you must realize that protecting your property and your financial well-being are one and the same. Choosing the appropriate insurance agent/agency, policy coverage, ancillary products, and even coverage amounts can help save you money in the event of a loss. Evaluate Coverage Amounts Your insurance expenses don’t indicate how “good” the coverage is. Some high-end properties aren’t required to be insured at market value. They could be insured effectively at the rebuild value, an amount that is significantly less. Consider the following for each property you own to guide coverage decisions:  »          How much could you afford to pay out of pocket if there were a loss? »          Are there other structures on the property and are they insured? »          After a large loss, would you make repairs to the home or clear the lot and sell the land? »          Is the property in an area prone to certain types of losses?  Prioritize Maintenance Many people think purchasing adequate insurance policies creates a failproof risk management strategy. But the truth is, insurance can’t and won’t cover every exposure you have. While you can’t stop a hurricane from damaging your property, quite a few of the most common losses are preventable, such as cooking fires, tree damage, and burst pipes. Regular property inspections and maintenance are crucial in identifying risks and can significantly reduce the likelihood that you experience a severe loss. So, what should you include in your risk management plan? Winter Plumbing // Drain, disconnect, and store garden hoses. Install faucet covers to help prevent outdoor faucets and connected plumbing from freezing. Drain sprinkler systems and swimming pool pumps. Turn off the water and fully drain plumbing systems at all vacant properties. Walkways // The expansion/contraction caused by freezing/thawing can lead to significant damage to exterior walkways, driveways, and stairs. Repair cracked, broken, or uneven areas. Holiday Cooking // Cooking is the leading cause of house fires. Remind tenants to exercise caution in the kitchen and provide tenants with kitchen safety information upon move-in. Spring Roof & Gutters // Check roofs for damage — replace cracked, buckled, or loose shingles. Clean gutters and downspouts to debris from accumulating. Be sure downspouts drain away from the foundation. Trees // Trim healthy trees and bushes back from utility wires. Hire a licensed and insured professional to trim dead branches and cut down large trees. HVAC // Have a professional inspect air-conditioning systems and clean ducts. Check hoses for leaks and make sure everything is draining properly. Summer Decks // Replace broken or weak boards and handrails/grab bars. Sharp edges, splintered or rotting wood, rusted nails, or nail pops are liability hazards and must be remediated. Pools // Ensure swimming pools and spas are up to current municipal standards. Pools should have a fence around the perimeter with self-closing and self-latching gates, anti-entrapment drain covers, and water depths clearly marked on all sides of the pool deck. Fall Alarm Testing // Carbon monoxide and smoke detectors should be installed on each floor in bedrooms, main hallways, and kitchens. Units should be tested monthly and replaced every ten years.  Heating // Tune-up furnaces and inspect HVAC systems. Have ducts professionally cleaned to prevent fires that may result from dust buildup. Pests // Seal or caulk cracks, gaps, or holes near baseboards, windows, and doors to prevent bugs and rodents from entering

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