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The key to surviving damage losses is understanding your insurance policy and understanding your rights and obligations during a very time-consuming and stressful claims process. By
LUIS R. ESTEVES, Jansen/Adjusters International
The Best Insurance Tips for Multifamily Investors
D
isasters can surprise us in different forms and can interrupt your business for months and years. A fire may start in one unit and spread to several others. Residents may break leases and leave the property following a disaster. The key to surviving these types of property damage losses is understanding your insurance policy and understanding your rights and obligations during a very time-consuming and stressful claims process. There are many moving parts in an insurance claim and it can be catastrophic if you do not have the proper coverage in place at the time of a loss. This is a once-in-a-lifetime occurrence for many, and they do not understand how to maneuver within the claim process. Review your policy. • Which perils do you have covered? For example, do you have complete windstorm coverage for your coastal multifamily property that is exposed to hurricanes, and how will a significant deductible affect your financial recovery? How about water damage coverage in case of a pipe bursting after a sudden winter freeze? Check the fine print of the endorsements and the exclusions in your policy to find out which perils you do not have covered. • Find out the extent of coverage for both inside
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and outside your property. There may be limitations based on the cause of the damage. For example, coverage for hail damage or flooding will have specific exclusions and or restrictions. Do the same for the property and equipment used for the business, like landscaping equipment, pool furniture, golf cart, etc. • Before your next policy renewal, have an assessment done on your property to determine the current replacement cost, considering the increase in construction cost that followed the pandemic. It could be 20% to 30% percent more than when you initially bought the policy, so you must consider increasing your insurance coverages accordingly. • Ask your insurance broker or public adjuster about your business interruption coverage and the difference between loss of profit coverage, loss of rent coverage, and extra expenses. Knowing the nuances is crucial to your business. Be aware of code compliance, increased costs of construction, and endorsements in your policy. If your building was constructed in the 1970s or 80s and suffers damage, you will have to rebuild it to meet the current codes. Building code updates may include a better roofing system, a sprinkler system, or rewiring the entire building (even the parts that were not damaged). Also, the building materials that will be required to do this – wood, steel, shingles, etc.
February 2023
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