Why Buy Two Insurance Policies? Because You May Need Them!
I received a call from a prospective insurance client here in the Baltimore Area last week that specializes in buying foreclosures. His particular set of circumstances were VERY challenging. He was purchasing the property from the bank who had already foreclosed and needed insurance. The former owner refused to believe any of foreclosure process and just thought he was “being scammed” and was refusing to move out. He would need to evict the former owner and then intended to do some rehab work and retail the house for a profit.
There are several insurance problems here. The first is that the unit is “occupied”, so he needed a “landlord policy” at the time of settlement. After he evicted the old owner, he would then need a “Builder’s Risk” policy which would account for the rehab work being done as well as the vacancy. I gave him quotes on BOTH of the correct policies he would need. He emailed back that he went elsewhere to another agent that sold him a cheap policy that would cover him whether it was occupied or vacant. Why buy two policies when he could buy just one? He just wanted to be covered as “cheap as possible”.
The sad answer is that he is NOT covered properly or went to an agent that doesn’t specialize in this area and did not know what he or she sold him. I am not aware of any cheap single insurance policy that covers BOTH your occupied landlord risk as well as the vacant builder’s risk while it’s being rehabbed. Insurance policies for “occupied property” have a “vacancy clause” in the terms and conditions section of the insurance policy. It says that if a property is vacant for a certain period of time, they do NOT have to pay you in the event of certain types of losses. The other possibility is that the agent sold them a Builder’s Risk policy and they are not covered for the landlord liability exposure of the tenant (former owner still living there).
This is a classic case of Price verses Cost. The client took the cheap insurance with the low price. The cost is that he is not insured properly. Luray Insurance offers Landlord Insurance and Builders Risk Insurance to guard against a number of risks as outlined above. Don’t hesitate to contact Steve Luray at Luray Insurance of Maryland by calling 410-602-2636 if you have any questions.