REI INK

Risk Management

Smoke Alarm Best Practices

The Things That May Keep You From Waking In the Event of a Fire By Justin Ford Most of the world changed their clocks back this past month to adjust to daylight savings time. With that, came the biannual message of “Change Your Clocks, Change Your Batteries” from the local fire department, as a reminder that it is time to replace the batteries in your homes smoke alarm and carbon monoxide alarms. This message is outdated and no longer complete. The progression in what we know about smoke alarms and preventing fire deaths in homes has moved forward a long way since that message started coming out in the late 1980s. The 10-year-lithium-battery-powered smoke alarm was invented in 1995 and now more than half the alarms on the market include these types that do not need battery replacement. The National Fire Protection Association (NFPA) began requiring the replacement of smoke detectors after 10 years in 1999 because 30% of smoke alarms older than 10 years are estimated to not work due to aging, removal of batteries, or failure of the homeowner to replace dead batteries. The real message now, in addition to changing out batteries, should be, “Check your smoke alarm type and check your smoke alarm age. Change if older than 10 years. Change if not sufficient to detect all fire types.” (CO Alarms should be replaced after seven years). Back in the 1980s, when the message was to just change your batteries in your smoke and carbon monoxide alarms, you had about 17 minutes to escape a house fire. Today, with the prevalence of synthetic materials in the home, you have two to three minutes to get out. Types of Alarms What you may not know about smoke alarms is that there are two types. The first is the ionization smoke alarm which came out in the 1960s. Ionization smoke detectors are well equipped to sense the very small smoke particles produced by fast-moving, flaming fires such as in a kitchen. In the 1990s, photoelectric-type alarms started coming out and became more popular. Photoelectric smoke detectors are best at detecting large smoke particles from slow, smoldering fires, such as an electrical fire from a short-circuit in the wall. While most smoke alarms sold today are the photoelectric type, Consumer Reports ranked the Kidde and First Alert Dual-Detection alarms (which detects smoke and fire through both ionization and photoelectric means) as the top smoke alarms for people to have in their homes in 2022.  Alarm Placement is Even More Important To comply with NFPA standards, the smoke or CO alarms you install in your home must emit an alarm sound that is at least 85 decibels and not more than 110 decibels. Most smoke alarms and carbon monoxide alarms sold in the US and Canada are required to put out 85 dB of sound at 10 feet. The goal is that if you are sleeping in your bed in your home, and a smoke alarm is set off, anywhere in the home, you should hear it because, through interconnectivity (smoke alarms connected by wire or wirelessly) the smoke alarm in your bedroom will repeat the sound at 85 dB and you should awake and have time to escape.  As early as 1997, the US Consumer Product Safety Council (USPSC) said that “single station smoke alarms (a smoke alarm that is not interconnected to others) installed in two- or three-level homes may not be sufficient to alert occupants in all areas of the home or cause a delay for some individuals to respond immediately.”  To round out fire protection in your home, it is important to include heat detectors that can interconnect with your smoke alarms. If there is a fire in your attached garage or attic, you will want to know about it right away. Heat detectors look like smoke alarms but detect a fast rise in temperature, or temperatures that exceed 135 degrees Fahrenheit. Here are some other considerations: Alcohol and Smoke/CO Alarms A study published by Michelle Ball and Dorothy Bruck of the School of Psychology noted that “Under benign circumstances, unimpaired adults aged 18 to 64 respond well to smoke alarm signals of 85dB and are at a comparatively low risk for death. However, alcohol ingestion greatly increases fire fatality risk across all age groups. The study found that 65% of fire victims over the past decade that had working smoke alarms were under the influence of alcohol.” Elderly/Hearing Impaired and Smoke/CO Alarms The NFPA has highlighted that older adults are an “at risk group” when it comes to residential fires. The NFPA says, “the majority of fatal fires occur when people are sleeping, and because smoke can put you into a deeper sleep rather than waking you, it’s important to have a mechanical early warning of a fire to ensure that you wake up. If anyone in your household is deaf or if your own hearing is diminished, consider installing a smoke alarm that uses a flashing light or vibration to alert you to a fire emergency.” Children and Smoke/CO Alarms Children ages 2 to 12 typically don’t wake to the sound of a smoke alarm. According to the US Fire Administration, “Children sleep longer than adults and spend more time in slow-wave sleep, a sleep stage that requires the loudest noise to wake someone. This is especially problematic because data show that 31% of people killed in home fires are sleeping at the time of the fire.” Ring® and others make smoke alarm detectors that electronically recognize when smoke alarms are sounding and use inexpensive items such as the Dome® Siren to amplify the alarms. Accepting that the smoke alarm is the single most important item in the home is the first step in a journey to making sure your family and friends can escape in the unlikely event of a fire. Recognizing that it is not a matter of “if, but when” a fire may happen in your home, is the second

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Insuring Your Flip

Risk Management Considerations During the Fix and Flip by Shawn Woedl While high housing prices and increased cost of materials has led to a drop in house flipping in the first quarter of 2021, it is still expected to be a profitable venture. Though purchase prices are high, the aggressive market also means buyers will be lined up when the flip is complete. Plus, distressed inventory is expected to surge as mortgage forbearance is lifted. With more skin in the game for either the buyer or the lender, it is increasingly important that flippers have the proper insurance in place to protect their investment asset. What type of coverage do you need? As a baseline, you would likely want to carry dwelling insurance and premises liability. Your property insurance would cover physical damage to the property caused by the perils covered under your policy. The perils that are covered will vary based on the coverage form you purchase, the two most commonly available being Basic and Special. Basic form covers such things as fire, storms, smoke, explosion, and vandalism. The causes of loss that are covered are listed on the policy. Special form coverage is the most comprehensive coverage form as it covers anything that is not listed as an exclusion in the policy. Of note, Basic form coverage does not include Water Damage or Theft. Because a property under renovation is likely vacant, it can be ripe for thieves looking to acquire newly installed appliances, pipes, or building materials. And water damage caused by a burst pipe may sit for days before it is discovered. The specific type of coverage you need may depend on the complexity of the work being done. Major structural renovations have different needs than mostly cosmetic updates. But a standard homeowners policy is not the right fit, nor is a “landlord” policy. These types of policies require the property to be lived in—homeowners usually requires that the occupant be the property owner (or the insured). If the owner files a claim on a vacant flip property under renovation that carries a landlord policy, the insurer can deny the claim for being uninhabited. If you are simply doing cosmetic or simple updates, a vacant property policy may suffice. Be sure that your agent knows that the property is being renovated. For larger projects, you will want to consider a Builder’s Risk policy. This coverage can extend to any materials on site that you own but does not cover the tools or equipment of any contractors that are left on site. When you purchase your property insurance, choose your property coverage amount that is equal to the purchase price of the property PLUS the renovation budget. If a property loss occurs midway through the project, keep in mind that the loss settlement cannot exceed your invested capital at the time of loss, which may be less than your total coverage limit. This is to ensure that you are not profiting from insurance. Keep any receipts for purchases you make along the way to submit as part of the claim. Your premises liability (or general liability) can protect you legally if a third party is injured while on the property. Vacant properties are magnets for explorers, and you could be held liable if someone who wanders onto the property is injured on the premises. Ideally, your liability limit starts at $1 million per occurrence. Keep in mind – premises liability does NOT extend to injury of someone you have hired to work on the project and be on site. Nor will it cover poor workmanship or negligence after the project is complete if you do the work yourself. What about your General Contractor? If you are doing a flip large enough to require a general contractor (GC), always hire someone who is properly licensed to complete the work for which you hired them. The licensing requirements are specific to the state. Your GC (and any subcontractors) should carry their own liability insurance to cover their business operations and their employees, including Contractor’s General Liability and Workers Compensation (if they have employees). Contractors Liability covers damage to your property for which the contractor may be responsible as well as coverage for Products and Completed Operations, ensuring that the GC is liable for any negligence in workmanship that leads to a lawsuit. When you hire a GC to work on your project, you should require them to add you (whatever entity that owns the property) as an additional insured on their liability coverage. This does two things: First, it extends coverage to you if you are named in a lawsuit caused by their negligence. Let’s say your contractor cuts corners when installing a staircase railing. After you have placed a tenant, the handrail breaks causing your tenant to fall. This type of liability claim would be picked up by your general contractor’s liability coverage and not your premises liability, protecting your loss history and future insurance costs. Second, if you are listed on the policy, you will be notified if the coverage lapses or is cancelled while the project is still active. If you own the property and doing the renovation work yourself, your premises liability protection does not extend to your actions and work while performing the contractor’s role. More specifically, you would need to purchase the contractor’s general liability coverages listed above AND premises liability coverage for incidents that are not connected to the project. To obtain this coverage, you will need to obtain the proper licensing as required by your state. Insurers are leery of covering flippers for fear of cutting corners to save a buck, so it may be tricky or costly to obtain this coverage as a flipper. You will still want to hire licensed and insured subcontractors for more specialized services like electrical, plumbing, foundation and structural work.  Ways to mitigate risk at your flip Maintaining a safe project site and taking some basic security measures can help mitigate the risk of

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How Home Service Plans Can Help Protect Your Investment

The Importance of Implementing A Risk Management Plan By: Brett Worthington In the world of real estate investing, finding the right property at the right time is just the tip of the iceberg when it comes to building and protecting your portfolio. Successful investors understand the importance of implementing an effective risk management plan along with strategies focused on value appreciation, expense management, occupancy and many other critical functions. For those in the residential space, solving for maintenance and repair issues is likely near the top of the list of priorities. Unexpected breakdowns to components of major home systems and appliances can lead to time-consuming, costly and frustrating experiences for tenants and owners alike. No matter how thorough the inspection or how well-maintained the property, minimizing the risk associated with ongoing repairs and maintenance is vital to managing expenses, minimizing gaps in occupancy, and protecting the value of the property. Home service plans (also known as home warranties), are a cost-effective and budget-minded option for investors who do not want to build their own network of repair services and technicians. Originally introduced 50 years ago to help give homebuyers peace of mind when purchasing a pre-owned property, home service plans ensure that if a covered item breaks down, the owner enjoys the benefits of budget protection and convenient, professional repairs. Members simply pay a pre-determined fee when placing a service request, and the company taps its network of qualified service contractors to diagnose and repair covered items that have malfunctioned due to normal usage. And, if a covered item can’t be repaired, it’s replaced, or they find an alternative solution. Relieving property management headaches Today, a home service plan can also help property investors manage their own budgets for repairs. The ability to be onsite or remotely manage the repair process can be challenging, especially when your portfolio is geographically distributed. Recruiting and onboarding a network of service providers to do the work is a labor-intense proposition and resolving maintenance issues in a timely fashion for your tenants is critical. Adding value by simplifying Along with protecting your cash flow and helping to alleviate operational headaches, partnering with the right home service plan provider can drive value in a variety of other critical areas, too. Some home service plan companies are expanding the scope of services to cover recurring maintenance concerns like HVAC and furnace tune-ups, or re-key services required when changing tenants.  An additional benefit of a home service plan is that, while it can be purchased at any time in the lifecycle of property ownership, it can also be paid for as part of escrow, simplifying your list of payments to track, and ensuring that you won’t have a waiting period for coverage to start. Some companies offer a choice of a two-year plan as well. Do your homework. Providers and plans vary significantly. A one-size fits all approach rarely works in life, and it’s certainly not the way to find the partner that’s right for you. You likely have a trusted team to work with throughout a real estate transaction: your real estate professional, title company, and inspector. Consider adding a home services company to that list. Talk to your real estate professional to get more details on the home service plan options available to you and do your homework. Here are a few additional – and very important things to keep in mind: Comprehensive coverage: It sounds simple – a plan covering systems and appliances should cover all systems and appliances in the home. But coverage can vary widely. Review a sample contract and make sure your plan has the per-item coverage you expect, and no surprise limitations on “wear and tear.” Property types covered: Some home service plan companies cover more than just single-family homes; make sure the types of properties you invest in can be covered by your home service plan partner, whether condos, duplexes, or new construction. Customizable options: Consider the add-on coverage and other services available, like roof protection, maintenance services like HVAC and furnace tune-ups, or convenience services like re-key. Innovation: Some home service plan companies are keeping things “business as usual,” requiring a phone call to request service and check on status, while others are focused on leveraging technology to simplify and improve the member experience. When it comes to requesting service, look for those not only offering obvious conveniences like an online portal to submit a request and track status, but also those offering remote troubleshooting and diagnosis. This minimizes the number of onsite visits required to resolve your repair, possibly eliminating them entirely, keeping your to-do list short and your tenants happy. Track record: Make sure the company you’re considering has a proven track record – a partner worth considering should have a sizable number of service requests and claims paid worth bragging about. With this checklist in hand, talk to your real estate professional and find a company and a plan that offers the most comprehensive coverage and works best for you. When you find your next investment property, you will be ready to order a home service plan prior to closing and be confident that your budget line for maintenance and repairs won’t be a guess anymore.

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Rental Property Risk Management

Preventative Measures for Successful Risk Mitigation by Shaun Shenouda While there is no stopping acts of God, you fortunately can mitigate many of the risks pertaining to your rental properties relatively easily and inexpensively. As you might suspect, some of the most prevalent risks pertain to losses caused by the residents. Given the increased propensity to spend more time at home due to COVID-19, there is an overall increased risk. Proactively taking steps to evaluate those risks and putting best practices in place to minimize those risks could save your rental property as well as lives! Fire! According to the National Fire Protection Association (NFPA), there were 340K house fires in 2019 (26 percent) resulting in 2,770 civilian fire deaths (75 percent); 12,200 civilian injuries (73 percent), and $7.8 billion in direct property damage (52 percent). Over the past three years, house fires have resulted in 40% of SES Risk Solutions overall losses which sustained an average loss of $70K per fire. We have also seen an uptick in frequency due to more people working from home, overloading their outlets, cooking fires, etc. WIRING Nearly 1/3 of the properties we insure were built in the 1960s and 70s, which coincidentally is when aluminum wiring was often used as opposed to the more expensive and higher performing copper wiring. Aluminum conducts electricity safely. It’s the connections that pose the most issues. According to the U.S. Consumer Product Safety Commission (CPSC), homes with aluminum wiring are 55 times more likely to have “fire hazard conditions” than homes wired with copper. Since permit data is often incomplete and/or unavailable, our investors do not always have easy access to determine if the wiring has since been updated. Solution: Engage with a professional contractor to inspect the property(s) to determine if the wiring has since been updated. Our research suggests the cost to be between $1500-$3000 to upgrade, if needed. FIRE EXTINGUISHERS Another highly effective and affordable best practice is equipping all your rental properties with a fire extinguisher. In a study performed by FETA (Fire Extinguishing Trades Association) where it recorded over 2,600 incidents, they concluded that in 81.5% of cases the portable extinguisher successfully extinguished the fire and in 74.6% of the cases the fire department was not required to attend. Despite the effectiveness, according to the PEMCO Insurance Northwest Poll, 27 percent of Northwest residents live without a fire extinguisher in their home. The poll suggests that among the most at-risk are renters, who are significantly less likely than homeowners to have fire extinguishers—58 percent of renters vs. 82 percent of homeowners. Solution: Generally, fire extinguishers are around $20. While they are easy to use, they will only be used if they are easily accessible. They also have a shelf life, so it is important to implement a recurring replacement process. We also recommend incorporating the location of the fire extinguishers and how to use them into your property management process.  SMART HOME DEVICES Despite marketing advantages, better tenant satisfaction and increased profits, the value proposition for most smart home devices has only recently become more compelling as the price point for these devices has come down considerably. In fact, demand for smart home devices is growing so fast that experts have coined the term IoRE—or Internet of Real Estate—to describe the booming market in smart home devices. The smart home device market has doubled in size from about $44 billion to $91 billion over recent years and is expected to reach $158 billion by 2024, according to data from Precise Security. While tenants are likely to value smart lights and virtual personal assistants (VPAs), installing smart home products in your rental property can also be an easy and cost-effective way to protect your property. The acronym “Smart” comes from “Self-Monitoring, Analysis, and Reporting Technology”. Some insurance companies, like SES Risk Solutions, value this increased real-time awareness and may even offer a premium discount for landlords that have invested in installing such devices. Solution: Evaluate the specific needs of your property and investment strategies when considering Smart home technology options. The two we have found to provide the most value are: 1)  Flood or moisture detectors. Renters may not place a high degree of value on these devices, but for a small price, moisture sensors can potentially save landlords a considerable amount of money through water damage prevention. Easy to install and affordable, these detectors can alert you to problems like slow leaks that may otherwise go unnoticed before they turn into major issues. They can also quickly inform you of big problems like burst pipes that can do major damage quickly. 2)  Smoke and carbon monoxide (CO) detectors. Smart smoke alarms and carbon monoxide detectors take safety a step further than traditional models. Rather than just sounding an alarm, these smart versions can also alert you and/or your renters if there is a problem via an app. VACANCY Another very important set of loss prevention best practices are centered on vacancies. With nationwide occupancy rates above 94%, according to John Burns Real Estate Consulting, vacancy risk management may not be top of mind for investors. However, according to SES Risk Solutions loss history data, losses on vacant properties are over 1.5 times more prevalent and severe. There is the obvious increased risk of slow detection of an issue be it smoke, water leaks, etc. There is also an attractive nuisance, which can draw in squatters and thus increase propensity for vandalism, theft and arson as well as bodily injury. Solution: Top 3 suggested preventative measures: 1)  Inspections. The landlord or property management company should physically inspect the vacant property on a regular basis (weekly). They should perform regular maintenance, remove fire-prone debris, check the plumbing, ensure the smoke detectors are functioning, confirm there has been no intrusion, etc. 2)  Winterization. Make sure plumbing is drained and heat remains on. 3)  Secure the property. Set up motion-activated exterior lights and put interior lights on a timer (simulate real usage). Home security

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Increasing Portfolio Value and Reducing Risk

The Need to Perfect Loan Collateral and Document Custody by Debbie Lastoria and Meaghan Hanley Every loan has a value at origination. The loan officer makes their commission, and based on the secondary market, the investor pays for a loan in accordance with the underwriting basis for which it was closed. This value should survive the life of the loan—but we all know it may not. The value may be impacted by a refinance for a better interest rate or default by the borrower, and this is considered based on statistics. However, there is an exposure that exists with the condition of the collateral file, which is not often taken into consideration upfront. Having a solid process of tracking and maintaining (at a minimum) the mortgage note, recorded mortgage, and title policy at origination is key. In a perfect world, you would originate all your loans and have that process put in place. Now enter the complex world of mortgage banking, where your portfolio was not self-originated, but rather acquired or purchased. Then add into the equation that your purchases include re-performing or non-performing assets. If the collateral file is the underlying basis of your loan value, how do you manage to a complete and perfected file regardless of the origination source? The growing need for a more complete custody process Before the financial crash, investors focused their loan origination requirements on a solid loan underwriting process. The assumption was that a good process would reduce the risk of loss should the borrower run into a financial setback and default. We all know that this was not the case, and then suddenly in 2008, the collateral file became the most important factor to sell a loan, foreclose, or even successfully release the lien. The problem was, while everyone was focused on the underwriting factors, the collateral file management was a secondary afterthought at best. Fast forward, it has been reported that homeowners in some form of default are back to 11% when pandemic related forbearance is considered. This, compounded with increased origination and payoff volume, along with the work from home challenges will again put stress on any collateral handling practices including the well-managed ones. With the challenges of 2020, the needed controls on managing a perfected collateral file have become more of a priority at origination. However, we are still seeing literally hundreds of thousands of collateral files with important documents missing, sometimes even the promissory note or endorsement to the proper interested party/entity. Regardless of whether you know the condition of the file, a perfected collateral file will be required for ALL life of loan events—which may be much more costly to manage when required than a proper review and remediation upfront.  For example, this caused serious problems during the foreclosure crisis because servicers were not able to provide the courts with proper documentation indicating their right to foreclose. In judicial foreclosure states, this problem proved to be very costly. In some states, the inability to produce the signed note meant the servicer’s entire case was lost. As a result, servicers are now required to validate their standing prior to first legal proceedings. This process includes not only a review of the collateral file but also a comparison to current land records to ensure all assignments of record are considered in the determination of the lender of record. While the number of loans in default had returned to pre-crash levels with proven successful loss mitigation efforts, this costly review process is still impacting the cost of servicing overall and will only get worse again as we prepare for the impact of pandemic related forbearance fallout. The market for whole loan sales is re-opening and all indicators point to a healthy expansion in 2021 especially when factoring in the non-QM origination and EBO (Early Buyout Program).  Purchasing and/or selling these assets typically requires loan review factors such as the underwriting and the mortgage position, as well as the condition of the actual collateral file validated with the land records. Typically, in today’s environment, this process could include: 1)  a due diligence firm, 2)  a title company, 3)  a custodian, 4)  a collateral remediation expert, 5)  attorneys, and then the custodian again. Not only does each contributor charge at a minimum a per order intake fee to begin the work, but the compilation of results from all parties in this fast-moving market is also taking too long. To further complicate matters, the results are inconsistent, causing further delays. The result is that some buyers are finding it difficult or impossible to combine analytics from all these parties relating to the loan in time to know the real value of the portfolio so they can make a quick resale back intothe market. If a firm that has just purchased a portfolio with the intention of turning it right away cannot quickly, and accurately, assess the value of the loans, they are likely to undersell. We have personal experience with a firm that, after successfully completing a project of the type outlined in this story, increased their purchase price by $50 million from the data compiled vs. the data confirmed. This suggests that the downside risk of failing here will be measured in tens of millions of dollars lost. Clear signs that the industry needs a better solution In our work of helping portfolio sellers prepare their pools for sale, we have found that the existing exception reports are often inaccurate even when reviewed by multiple firms. The non-note collateral is often improperly married to the note collateral and improperly handled trailing documents fill backlogged queues. Worse, where each of the parties investigating the files returns a different result, it must be re-reviewed to resolve the discrepancies. Some new origination or seasoned portfolio issues that should be considered for best execution downstream are: Ensuring you have proper controls for Agent and/or Corres-pondent follow-up Building a tracking and reporting vehicle that incorporates third party data sets Pre-sale review and remediation to proactively

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Do Your Homework on Coinsurance

Coinsurance can be costly if you don’t understand the penalties. You’re a savvy investor. You make sound, confident decisions about the properties you’ve added to your portfolio. And your strategy has been successful. Yet even the most successful real estate investors can be snagged by the penalties associated with valuation and coinsurance, outlined in the fine print on your insurance policy. If you’re like most bullish investors, you’re probably heavily leveraged and work with lenders when acquiring new properties. Every dollar counts. You know that the lower your property is valued, the lower the insurance premium you will pay to cover it. You may have bargained for a great deal to acquire your property and you’ve calculated that should something happen, it may cost even less to replace the property. But, your insurer may put a higher replacement value on your property. That’s as it should be because you can’t rebuild to even the current property status for your purchase price. Discrepancies in valuation have become one of the biggest challenges in the property insurance industry. Gone are the days of guaranteed replacement cost policies where properties were simply replaced outright, no matter what. Mass damage from events such as hurricanes put an end to those offerings. They also put several smaller insurance carriers out of business. To compensate, today most insurers require your property to be coinsured for most of its replacement value. What Is Coinsurance? What is a coinsurance requirement? Although the term is used widely, sometimes it is confused with “copay.” And the term takes on a very specific meaning in property insurance. Coinsurance is the percentage of value you are required to insure against the value of your property. Usually, this is around 80%, and it is a typical bank lending requirement for most loans. The tricky part is that the replacement value is determined by your insurance company only after the damaging incident. But if you insured your property for less than the coinsurance percentage to pay a lower premium, then you will be hit with a coinsurance penalty. This amount can be costly at best and put you out of business at worst, especially if you have several properties impacted by weather or other events simultaneously. To help clarify, here’s an example: You own a multifamily rental property that you calculate can be replaced for $375,000. Your insurance carrier is requiring you to have at least 80% in coverage. You purchase $300,000 in coverage (80% of value), believing you are compliant. Suddenly, you have $100,000 in damage. But your insurer determines the replacement cost is $500,000. Your insurer will calculate how much to pay on the claim by dividing the coverage amount you bought ($300,000) by what you should have purchased (80% of $500,000, or $400,000 in coverage). In this case, it comes to 75%. So, for your claim of $100,000, you will only receive $75,000 (75%). The $25,000 difference is your coinsurance penalty. Again, the difference in value is key. Not knowing the replacement value that your insurer places on your property is one of the most surprising and costly issues investors at all levels face. This is not also calculating in any deductible amount. Although our example uses a coinsurance requirement of 80%, some policies require even more—up to 90% or 100%. Protecting Yourself To overcome the replacement value issue and avoid a costly penalty, the best practice is free and easy—talk with your agent. Here’s what you need to ask: 1)  Does your policy have a coinsurance penalty? (Most do)  2)  How much is your coinsurance penalty? 3)  What is your property’s replacement value? 4)  Have you properly insured your property? 5)  Are there any special requirements, such as coverage for floods? A sound agent will be completely transparent on your behalf and will tell you about any penalties you may not know about. Some insurance carriers will allow you to remove the coinsurance penalty—for a fee. In many cases, the additional cost to have it removed may be worth it in the long run. It’s also important to know that not all policies are the same. More mainstream insurance carriers may offer very general policies and try to make them seem all-inclusive. Some of these are called “basic” or “named peril” policies. The general policies have two lists: what is covered and what is excluded. It’s always better to work with an agent who specializes in property insurance. Ask whether a “Special” or “All Perils” policy is better for you. This type of policy may include waivers for things like water damage and theft. They cover all risks—unless they are explicitly called out on its list of exclusions. Special policies often cover significantly more than basic policies. Again, an experienced property insurance agent can fully answer your questions and will advise you on which type of policy is best for you. A reputable agent won’t try to win your business at the lowest price. As with many things in life, you will get what you pay for when it comes to property insurance coverage. Doing your homework will always pay off.

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