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It occurred to me recently that I’ll never REALLY be satisfied with paying for insurance. Home. Auto. Life. Travel....whatever. I could think of hundreds of things I'd rather spend $3,000 a year on. 1. Buy used Seadoos every year to ride and abandon. 2. Buy new grass each year and never take care of it knowing more is coming next year. 3. Unlimited Ice Cream and Milkshake Budget. 4. Donate it. (had to offer up SOMETHING that wasn't totally self indulgent) This could go on, but I think you see where I'm going here. Insurance is a lot like PROPERTY TAX or AN OIL BILL. I don't WANT to pay it, but it's a requirement if you have a vehicle, or home. So with this in mind, I submit to you a suggestion for improving your feelings about these payments. GET VALUE.Make sure the money you spend is MAXIMIZING your personal enjoyment of this otherwise disappointing expense.It seems that a LOT of people derive the VALUE from knowing they paid the absolute bottom dollar for insurance coverage. They shop for new carriers every year, they don’t mind waiting on hold forever, and they have zero interest in getting to know the people offering that product. THE VALUE FOR THEM is about feeling like they got the VERY LOWEST PRICE AVAILABLE. In today's world.... I TOTALLY get that approach. It keeps the most dollars in your pocket TODAY, and you're rolling the dice on never needing to use it. If you're this type of customer....consider a direct insurer. There are lots of them out there catering exactly to what you're looking for. (TD, UNIFUND aka JOHNSON, Sonnet, etc) The model is setup so that the insurers save costs on selling it (using call centers) and then pass some of those savings to the customer through lower premiums. ALL UPSIDE right? Not necessarily. There's usually a TRADE OFF.When you buy direct from an insurer, you're opting to represent yourself in all dealings with that provider. A broker's job is to advocate for their client in a claim. So by removing the broker from the equation you're forfeiting that extra layer of protection/advice you could be getting. No different than buying a home without a realtor. Super idea until you find out the house is built on a swamp. Since you're actually risking more to buy direct it makes sense the price should be lower. If you have a claim that goes sideways hopefully you've banked some of that money you've saved on premiums to hire a lawyer. You forfeit the right to complain if you declined a coverage to save money, or don't feel well represented in a claim situation. You shouldn't troll the TD social media accounts about how BAD THEY ARE AFTER A CLAIM IS DENIED. *Although I should admit I enjoy reading those. If lowest price was the only thing people VALUED the market would be FLOODED with Kirkland Basketball Shoes and Big 8 Jeans...yet I can't find Big 8 Jeans anywhere. VALUE can be lots of things... |
| According to every HOUSE FLIPPING TV SHOW I've ever seen you simply buy a new place...do some minor cosmetic repairs then BAM you're renting it out and building equity! Sounds easy huh? Well maybe. |  "The seller told me no windows improves ventilation. I kind of agree." |
THINGS THAT HELP
MONEY.
Being a landlord is not exactly "Passive Income". You'll be shouldering the costs of:
- New mortgage & property tax (20% down on rentals)
- Insurance (usually higher cost than normal home insurance)
- Regular and Unexpected Maintenance
SKILLS.
How HANDY are you?
If the answer is NOT AT ALL, refer back to the last heading 'MONEY.'
Minor plumbing, electrical, yard maintenance etc is a certainty so if you're able to fix things or know someone willing to fix things for low cost, that will help.
Also using a reputable home inspector helps you dodge homes that are littered with future issues. Don't skimp on that.
If the answer is NOT AT ALL, refer back to the last heading 'MONEY.'
Minor plumbing, electrical, yard maintenance etc is a certainty so if you're able to fix things or know someone willing to fix things for low cost, that will help.
Also using a reputable home inspector helps you dodge homes that are littered with future issues. Don't skimp on that.
TIME.
There's the house-hunting itself.
The meetings with lawyers, bankers and insurance brokers.
The initial furnishing/renovating if needed.
Posting and interviewing tenants and/or property managers.
The checking in on the property and stick-handling of tenant wants/needs.
The meetings with lawyers, bankers and insurance brokers.
The initial furnishing/renovating if needed.
Posting and interviewing tenants and/or property managers.
The checking in on the property and stick-handling of tenant wants/needs.
Oh and there's that other house you live at.
Did you plan to keep up on that one too?
Figure out what you want your lifestyle to look like and how much time you'll really have to dedicate to this venture. It can be a challenging part-time gig.
AN INSURANCE PERSPECTIVE
When insurance companies consider 'Rental Properties' they often label these types of risks as "RESIDENTIAL REALTY".
Realty is a big part of Atlantic Canada's economy but from a profitability perspective, it's not been a great performing category of insurance. Increased claim costs from things like water damage, and slip and falls have insurers shying away from these types of risks, and wanting A LOT more premium for the ones that they have.
MINIMIZING RISK & COSTS
Consider starting small
Companies are more likely to take you on if you can attach your new rental property to your Homeowner's Insurance policy. If you only have one you're more likely to pay closer attention to it, and it's still a PERSONAL INSURANCE risk. This will give you a feel for life as a Landlord as well and help you figure out true costs and lifestyle trade offs. If you like it, then maybe start that corporation/holding company.
Live close by
Some insurers have rules around how far you can live from a secondary property for them to take it on. That may be a distance of 50-100kms, while others may charge more as the distance increases or not take it at all.
Clients who own rentals in other provinces are some of the more challenging ones to place since so much of the investment rides on the tenant or a designated Property Management Company. Coverage offered can be quite limited, so don't assume anything on these...have a broker review the wording.
Clients who own rentals in other provinces are some of the more challenging ones to place since so much of the investment rides on the tenant or a designated Property Management Company. Coverage offered can be quite limited, so don't assume anything on these...have a broker review the wording.
Require tenant insurance
If the building and my stuff is covered under my own policy, why should I care about their coverage?
Answer: It provides you and often your insurance company the ability to collect from someone.
There's plenty of reasons to require this, but I'll give you two that I think are most important with today's state of insurance.
1) The tenant policy may pay costs that the tenant is liable for, that ARE NOT covered under your building policy.
Example:
You have a $10,000 water damage deductible and a tenant overflowed a sink causing $8,000 in damages. Your building policy will not respond to the incident since the loss is UNDER YOUR DEDUCTIBLE...thus YOUR problem, not theirs.
Good luck getting a tenant to pay out of pocket for that...BUT since you did your homework and CONFIRMED they had insurance (which should be on file with your broker) you may have access to some help!
You have a $10,000 water damage deductible and a tenant overflowed a sink causing $8,000 in damages. Your building policy will not respond to the incident since the loss is UNDER YOUR DEDUCTIBLE...thus YOUR problem, not theirs.
Good luck getting a tenant to pay out of pocket for that...BUT since you did your homework and CONFIRMED they had insurance (which should be on file with your broker) you may have access to some help!
2.) It keeps your account looking good...specifically having "professional operations" and "reasonable loss ratio".
Professional Operations
In today's market insurers need convincing your rental properties are a good idea to cover at all. Having tenants who actually have in-force insurance means you're doing a good job of rental management which reflects positively on your risk profile.
Loss Ratio
Is the difference between the premiums you pay and what an insurer pays out in claims. Example: You pay $5,000 in premiums in a year, and the insurer paid $20,000 in claims. Your LOSS RATIO (400%) is awful and at renewal you'll be either a big increase in premiums or a cancellation.
Having a loss that YOUR INSURER can "subrogate" or "collect" from the TENANT'S INSURER helps reduce that ratio. This is especially helpful on large losses.
In today's market insurers need convincing your rental properties are a good idea to cover at all. Having tenants who actually have in-force insurance means you're doing a good job of rental management which reflects positively on your risk profile.
Loss Ratio
Is the difference between the premiums you pay and what an insurer pays out in claims. Example: You pay $5,000 in premiums in a year, and the insurer paid $20,000 in claims. Your LOSS RATIO (400%) is awful and at renewal you'll be either a big increase in premiums or a cancellation.
Having a loss that YOUR INSURER can "subrogate" or "collect" from the TENANT'S INSURER helps reduce that ratio. This is especially helpful on large losses.
BE ACTIVE IN MANAGEMENT
If you're renting multiple properties you should be in the game of transferring risk and a good broker can help you with this.
We can proactively identify areas of potential friction BEFORE they happen like improving lease agreements...providing snow/ice removal best practices etc.
Owners need to understand the value in this activity and take an active role in risk prevention to get the benefits.
Seldom is anyone interested in Risk Management until AFTER they have a problem and in this business that is often too late.
We can proactively identify areas of potential friction BEFORE they happen like improving lease agreements...providing snow/ice removal best practices etc.
Owners need to understand the value in this activity and take an active role in risk prevention to get the benefits.
Seldom is anyone interested in Risk Management until AFTER they have a problem and in this business that is often too late.
MD
An extreme example
What is it?
An ice dam is a buildup of ice that holds melting snow on the roof, stopping it from running into the eavestroughs and away from the building.
This can cause your roof and ceilings to leak damaging your home’s interior walls and insulation,among other issues.
Check out the video below on how it happens.
This can cause your roof and ceilings to leak damaging your home’s interior walls and insulation,among other issues.
Check out the video below on how it happens.
If you notice any water spots, you should try and get up in the attic to confirm the source of the leak. If you don't feel comfortable doing it, find someone who is.
Damages can usually be minimized if actions are taken quickly, and could save you from needing to make a claim on what could be a minor repair.
Discuss the situation with a knowledgeable broker and decide what next steps are really needed.
Damages can usually be minimized if actions are taken quickly, and could save you from needing to make a claim on what could be a minor repair.
Discuss the situation with a knowledgeable broker and decide what next steps are really needed.
A Claim for this won't get you a new roof.
Ice Damming repairs are usually limited to:
1. Drying out the wet areas.
2. Repainting the ceiling/walls that were affected.
1. Drying out the wet areas.
2. Repainting the ceiling/walls that were affected.
It's been my experience that Ice Damming SELDOM results any need for exterior repairs. The roof itself isn't compromised and when it melts off you're back to normal.
In some cases the actual damages are limited to drying the wet insulation/drywall and a water ring when it dries. Obviously it's not always this easy, but sometimes it is.
In some cases the actual damages are limited to drying the wet insulation/drywall and a water ring when it dries. Obviously it's not always this easy, but sometimes it is.
'Ice and Watershield'
'Ice and Watershield' is also something that comes into play on a claim of this nature. It's a waterproof barrier used on the edges and in the valleys of a roof that was designed to help prevent water from coming through it.
Sometimes a building owner will discover their structure never had 'Ice and Watershield' at all, leaving it more susceptible to this kind of damage.
While this shouldn't affect their ability to make a claim, it isn't something the insurer will pay to have installed if you didn't have it before.
Sometimes a building owner will discover their structure never had 'Ice and Watershield' at all, leaving it more susceptible to this kind of damage.
While this shouldn't affect their ability to make a claim, it isn't something the insurer will pay to have installed if you didn't have it before.
Get Some Advice
There are too many types of Home Insurance coverage in Nova Scotia to list.
Some SPECIFICALLY EXCLUDE "damages from Ice Damming" and some policies may only pay a percentage of the cost of replacement shingles based on how old your current ones are.
Some SPECIFICALLY EXCLUDE "damages from Ice Damming" and some policies may only pay a percentage of the cost of replacement shingles based on how old your current ones are.
Knowing what's covered, or better yet having someone else who knows that can bring some peace of mind.
Get yourself some real advice about what you HAVE and do it BEFORE you have an issue.
Feel better about what you're paying for.
- MD
Get yourself some real advice about what you HAVE and do it BEFORE you have an issue.
Feel better about what you're paying for.
- MD
About the author
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