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Category: Landlord Insurance

Do You Know These 4 Often Overlooked Coverages for Property Managers?

Posted on by Jon Blankenship

When it comes to insurance, property managers and residential building owners often focus on general liability and property coverage. While these are crucial, there are additional risk exposures that need to be addressed. Here are four important types of coverage you might be overlooking:

  1. Errors & Omissions (E&O) Coverage

    What is it?

    Errors & Omissions insurance may help protect you against claims of negligence or inadequate work. If a tenant sues you for failing to perform your duties or for providing incorrect advice, E&O coverage might help with costly legal fees and settlements.Why you need it:
    Property management is a complex field where mistakes can happen despite best efforts. Whether it’s a clerical error that leads to financial loss or a misstep in tenant placement, E&O insurance provides vital protection.

  2. Tenant Discrimination Coverage

    What is it?

    This coverage offers protection if a tenant (or prospective tenant) alleges discrimination based on race, religion, gender, etc., during the rental process or tenancy.

    Why you need it:

    Even with the best intentions, discrimination claims can arise and lead to expensive lawsuits. Tenant discrimination coverage can help manage the financial burden of legal defense costs and settlements.

  3. Workers’ Compensation Coverage

    What is it?

    Workers’ compensation insurance can help cover medical expenses and lost wages for employees who get injured while working on your property.

    Why you need it:

    If you employ staff such as maintenance workers, cleaners, or security personnel, workers’ compensation is often legally required. But even office staff may have risk exposures such as moving large packages or injuries during on-site work. It can also protect you in lawsuits brought by employees for workplace injuries.

  4. Cyber Liability Coverage

    What is it?

    Cyber liability insurance protects against data breaches and cyber attacks, covering costs like legal fees, notification expenses, and compensation to affected parties.

    Why you need it:

    Property managers handle sensitive data, from tenant applications to payment information. A breach can not only damage your reputation but also lead to significant financial consequences. Cyber liability coverage helps mitigate these risks.Have you considered these overlooked coverages? We’re here to help you better protect your business and assets. For more detailed advice tailored to your needs, contact Brandon Patterson on our team at brandon@ownbyinsurance.com

On the Horizon: Cabin and Vacation Rental Insurance Trends as 2025 Draws Near

Posted on by Ownby Insurance Service

If you are a vacation rental owner, cabin rental owner, or rental property owner, understanding the current trends in the insurance market is essential to managing and protecting your investment. The landscape in 2023 is shaped by a series of challenges and shifts that are important to consider when evaluating your insurance options. Here’s a detailed look at the trends and challenges facing the cabin and vacation rental insurance market today.

The Market Trends

We’ve all heard talk of inflations impact on our economy, and although it is down from a peak of 9% in mid-2022, its effects continue, including homeowner and vacation rental insurance markets. Elevated prices for building materials and construction labor have persisted along with the timeframes for that works completion. This adds up to make rebuilding or repairing properties a costly endeavor. For rental property owners, this means higher expected costs and the need for adequate insurance coverage to mitigate potential financial impacts.

Increased Costs Due to Natural Disasters

Natural disasters and severe weather have become a prominent concern in the cabin and vacation rental insurance market. In 2023 alone, there were 28 severe weather events with estimated costs ranging from $1 billion to $10.5 billion. Unfortunately, vacation and cabin rental properties are frequently in areas with higher risk for natural disasters because of the correlating natural beauty of those areas. Forests, mountains, and coasts are amazing, but can also be inherently risky. Rental property owners, particularly those in high-risk areas, should assess their policies to ensure sufficient protection against these increasingly common events.

Challenges in the Insurance Marketplace

Insurance companies’ willingness to provide property insurance remains low, especially in regions with a history of significant losses. This cautious stance has led many insurers to exit markets deemed too risky, leaving property owners with fewer options. Consequently, those remaining in the market may face increased premiums or restricted coverage terms.

Growth of the Excess & Surplus Insurance Market

With traditional insurers pulling back, the excess & surplus (E&S) insurance market has expanded to fill the gap. While E&S insurers can offer more specialized coverage options, they often come with higher rates and/or reduced coverage compared to standard insurance policies. Additionally, different regulations governing E&S insurance can complicate decision-making for property owners unfamiliar with these policies and their restrictions or language.

What Rental Property Owners Can Do

Given these trends and challenges, vacation and cabin rental owners should take proactive steps to safeguard their assets:

  • Regularly Review Insurance Policies: Ensure that your coverage is up-to-date and accounts for current rebuilding costs and potential natural disaster risks.
  • Explore Additional Coverage Options: Consider E&S policies if traditional insurance is unavailable, but be mindful of the potential trade-offs in terms of cost and coverage.
  • Stay Informed About Market Changes: Keep abreast of news and developments in the insurance sector to anticipate and adapt to changes that may affect your coverage needs.

Talk with those that understand this market and can help guide you. Brandon Patterson and our experienced team can help you navigate the cabin and vacation rental insurance market. With knowledge, property owners can better position themselves to protect their investments and maintain financial resilience in the face of unforeseen events.

Reach out to Brandon today at brandon@ownbyinsurance.com for help with your coverage needs!

Why Do Natural Disasters Elsewhere Impact Insurance Rates Locally?

Posted on by Ownby Insurance Service

A hurricane in Florida. A flood in New York. A wildfire in Colorado. What do any of these have to do with Tennessee’s insurance rates? It would be easy to say, “Oh, that’s just the insurance companies charging us for money they had to pay for other claims.” However, it goes much deeper than that, so let’s discuss why losses elsewhere impact premiums here.

To start with what you probably did know – yes – there is an impact in premiums when companies lose money elsewhere. But it’s not as simple as “greed” for insurance companies. The way these companies make a profit is measured through a “combined ratio” – a metric that calculates their loss ratio and expense ratio. In other words, the amount they’ve paid out for losses is added to their business expenses and divided by the amount of premium they’ve “earned” from insureds. A combined ratio over 100 means that the company – in the most basic sense – is losing money.

Companies that continually lose money typically cease to operate after some time. That is one reason why there is an impact on your insurance rates based on losses in other parts of the country, but it’s far from the only reason. Here are three more:

Actuarial Predictions

Companies rely on actuarial science – the discipline that applies mathematical and statistical methods to the systematic observation of natural events to assess the risk of events occurring and help formulate policies that minimize this risk and its financial impact on companies and clients – to measure future risk. When there are more disasters, these measurements increase future predictions of risk, in turn resulting in filings for higher rates.

Claims Costs

When there are significant natural disasters, especially multiple disasters across the country, there is a major impact on the supply chain. The cost of materials and labor can increase significantly, as can the time for mitigation and repairs. This all adds up to higher claims costs, which in turn lead to a need for higher rates.

Reinsurance Costs

Insurance companies buy policies of their own – called reinsurance – to share the risks they insure. As claims and costs go up globally, the price of reinsurance goes up as well.

You might ask why these companies don’t just focus on areas of less risk – but it’s not that simple. A practice called “spread of risk” lessens the concerns of one major natural disaster impacting all or most of a company’s insureds. And there is risk everywhere. We may not be impacted by a hurricane, but a hailstorm, tornado, or wildfire is certainly possible.

All these factors go into ratemaking decisions for insurance companies. As we progress through hurricane season and other natural disasters occur, just keep in mind that the impacts from these events are not always immediate and not restricted to where they are happening.

If you’d like to know more, contact Brandon Patterson on our team at brandon@ownbyinsurance.com.

The Vacation and Cabin Rental Excess & Surplus Insurance Market

Posted on by Ownby Insurance Service

The property insurance marketplace remains in what is called a “hard market” as we progress through 2024. Factors including cost of materials, catastrophe losses, supply chain interruptions, and increased time and cost of labor have resulted in insurance companies reducing the amount of risks they want cover, restricting locations, and raising premiums.

These impacts are often higher in the areas that are popular for vacation and cabin rentals. For example, beach rentals are higher to insure due to coastal risks, and mountain rentals are often harder to insure due to wildfire risks. But there are still options for coverage and an independent agent can provide you with information on your choices, as they are not tied to a single insurance company like a direct writing insurance agent may be.

That being said, these options may have intricacies you are not aware of, as all insurance companies are not the same, nor or they regulated the same.

The Excess & Surplus Market

With fewer insurance companies willing to cover the risks of vacation and cabin rentals, some are turning to the Excess & Surplus (E&S) insurance market for coverage. These companies typically offer non-admitted insurance policies, which means they do not fall under the state regulations and have not been “approved” by the Department of Insurance. However, they are still reviewed by regulators, and the companies themselves may often have the same financial ratings and reviews as other companies on a national or regional level.

The positives of these options are the flexibility of the policies and rates. They can move quickly to adjust what they offer and respond to volatile markets like what we’re seeing now. They may have lower rates than competing programs, but it is important to understand if coverage differences are responsible for those rates.

The concern of these options is they are not subject to the states’ Guaranty Fund protections. This means, if the insurance company were to become insolvent, there would not be state government protection to pay claims from a fund that has already been established.

There are, however, ways to determine how great of a concern this should be for you. The financial ratings and reviews we mentioned can be reviewed by the public. Organizations like Fitch, AM Best, and/or Demotech may have reviewed the companies’ financial data and provided reports of their current standing and future outlook. These reports are fairly standardized and straightforward, often assigning letter grades like “A” to resulting reports.

So, is an E&S market the best option for your risk? In Tennessee, you may need as meaning as three admitted companies to decline your risk before you are eligible to access the E&S market. But in the current marketplace, that may not be much of an impediment. The key is to understand what is available to you, and what differences are in the policies you’re considering.

Our agents can help you do just that! We’ve been helping insure cabins and vacation rentals for many years, and we’re here to help you understand your risks and options. Contact Brandon Patterson to get started today – brandon@ownbyinsurance.com or 865.453.1414.