Episode #012 - How does insurance work for investors? In this episode we visit with Michelle Pepper. Michelle has extensive experience in the field of insurance and she is highly qualified to discuss that question and many more. Join us as we get an insider’s opinion for this specific aspect of the insurance world. (https://youtu.be/woag6sCnItg)
Michelle’s Bio: Michelle has years of experience with both State Farm and Davis Dyer Max, and she is adept at serving her clients whether locally or across the country. As an advisor to her clients, she helps them achieve a well-rounded plan to protect their assets and manage their risk. She works with businesses and individuals to prepare a customized risk management plan including insurance coverages, loss control recommendations, and risk tolerance assessments.
Episode #012 - REN Podcast Transcription - Michelle Pepper
Jason: Good afternoon everybody. This is Jason Reynolds with the ‘Real Estate Now’ podcast. Today, I am excited because I have Michelle Pepper with Davis Dyer Max insurance. How are you doing Michelle?
Michelle: I am good.
Jason: Good, awesome. Michelle has been working for all my clients in the past that are specifically investors and she has done a great job. So, I wanted to bring Michelle on and we are going to get to know her a little bit and we are also going to talk about specifically insurance for investors and some topics in that arena. But first, I did a little research but there is not much about you online, so I guess that is a good thing. There are only two things; you were with ‘State Farm insurance for a little over 29 years.
Jason: And then, you have been with Davis Dyer Max for 10 years.
Michelle: That is correct.
Jason: Can you tell us a little bit about yourself? Do you live in the area? How long have you been in the area? Are you married? Do you have kids?
Michelle: I grew up here in Garland and I am married. We just celebrated our 40th wedding anniversary and we have one daughter.
Jason: Awesome. All the family lives in the area then.
Michelle: We do.
Jason: When you were with ‘State Farm’, was it in the area as well? Was it in Garland?
Michelle: Yes, it is actually in the same building. We did not move far.
Jason: Then you jumped over to ‘Davis Dyer Max’.
Jason: What is the difference between ‘State Farm’ and ‘Davis Dyer Max’? What would you say is the difference between them? (1:39)
Michelle: ‘State Farm’ is a direct writer and ‘Davis Dyer Max’ is an independent agent. The difference between them; ‘State Farm’, you work for ‘State Farm’. ‘Davis Dyer Max’ we have the ability to go out and shop the market.
Jason: So you are quoting multiple types of companies.
Jason: Okay, that makes sense. Jumping into the topic itself, you deal a lot with investor properties.
Jason: Is that the majority of your portfolio?
Michelle: Yes it is.
Jason: So what is the difference when you are looking at policies? What is the difference between a rental dwelling policy versus an owner-occupant type policy. What are some of the main things that are different? (2:15)
Michelle: Probably the largest is; you don’t typically have contents on this investment type properties. It will help with the pricing number one but, if they are going to have a deductible in there cost wise, it is not to me cost effective. I just tell them, “I will probably do without it. You are going to have a deductible involved”. That is probably your main difference; you if course got the structure coverage, you got the liability. We write all of our placement cost type policies and you kind of pick and choose deductibles and everything. But as far as the coverage type, they are pretty similar.
Jason: When you are looking at deductibles, I know for personal homes it can vary. What is the highest deductibles a person can have versus the lowest and what you maybe see on a typical policy in range? (3:23)
Michelle: Right, there are usually two deductibles. The first one is for ‘wind and hail’ and it is usually in percentages and it is 1-5% and that would be the percentage of the dwelling structure limit is. Then you would have the ‘All other Peril’, which would be in any other type of claim except wind and hail. Which would be fire, lightning.
Michelle: Tornado would be under the ‘wind and hail’. That would be wind.
Michelle: Water damage and things like that. Those deductible start at 1,500 and go up to 5,000.
Jason: Okay. If somebody decided to get a 5% deductibles on similar premiums can be pretty low because they would be taking a lot of risks if something happened? (4:20)
Michelle: Certainly right.
Jason: Versus the 1% deductible you are going to be paying for a much higher premium.
Jason: On average, what do you see a lot of your clients doing? Do they pick the middle road or does it always depend on what their…
Michelle: It is all about your comfort level.
Michelle: In this day and age, I see more of the investors wanting higher deductibles.
Michelle: But it is all about if you are comfortable and probably whether you have 5 properties or 10 properties, that might make a difference also. But I have a lot of investors that have gone with the higher deductibles to help save the premium.
Jason: They are almost self-insuring in some ways to cover that. (5:14)
Michelle: Yeah, you want to make sure that you got the coverage for catastrophic. I tell people, “It is not always wise to turn in the smaller claims because those are strikes against you”. I think it is better to save it for the larger loss.
Jason: Okay, that makes sense. You mentioned some seconds ago about actual cash replacement; actual cash value versus replacement cost.
Jason: When I have done research before, it is very important to figure out what policy is on that because it can make a difference when you file a claim.
Michelle: It certainly can.
Jason: Do you do different policies for different options or do you… (5:51)
Michelle: I really stay away from the ones that are actually cash value. If there can be coverage, I want there to be coverage there when you do have a claim. Replacement cost is much different than the actual cash value policy especially if it is an older home. It is very important to have the replacement cost coverage on there.
Jason: Okay, if they were to call you to get a quote on insurance, are you always going to be quoting them for policies that have the replacement cost?
Jason: Okay. Even if they are contacting anybody else, it is important to ask that question.
Michelle: Yes, it is because there are a lot of policies. I deal with many investors and there are a lot of different policies out there.
Jason: Okay, got you. That makes sense. When you are talking about policies, this is a big area because you cover pretty much the whole Metroplex and I have seen you go even out of the Metroplex. (6:45)
Michelle: I do, I go all over the United States.
Jason: Okay, what areas do you cover?
Michelle: When I came here into the agency, they had never had so many licenses that they had to get for all these different states.
Jason: Chances are you cover it.
Michelle: One coast to the other and if we don’t have our license and we can get it, we will get licensed for that state.
Jason: Okay, if you are looking say, in this area, when you are looking at premiums. Do you see a difference in terms of older properties versus newer properties? (7:20)
Michelle: Definitely. The newer properties, you are going to receive a better wright on, same with the roofs. If you have an updated roof, you are going to see credit given to that quote. Even if you are issued a policy the next day, they would even get credit for one day out and when it needs to be effective. Lots of different types of credit that you can develop on these quotes and we try to ask all the questions to be able to get you the best pricing out there.
Jason: You mentioned having a newer roof can help. It is more of a shot at the dark based on areas like in the Metroplex or those it change on a yearly basis? (8:12)
Michelle: It’s changing all the time.
Michelle: I do so much of the quoting and I can typically tell you and if an area changes, I can tell you that. Within a month or two, we will start seeing the change and it’s like, Oh! This is a really good wright for this carrier or with another carrier. They really have good wrights so it changes.
Jason: Does that change because say, a year ago, a storm blew through certain areas and there are claims. So that they are changing based on a region.
Michelle: Yes, all by storm, the county, zip code, a lot of that.
Jason: Jumping into that, there is a question that you and I have a gotten a ton from out of state investors. Are there certain areas to avoid for hailstorms or tornados? What is your response on that? (9:10)
Michelle: If you live in the North Texas area, you will. It is not if, it’s when. We just have hail and we just need to be prepared for it. The newer risks that we are seeing put on the house anymore seem to be holding up better because the new material is just a better quality. Some of these people are putting the UL hail resistant roofs on them that is helping with it. That is the only time that if you have a new roof and we have a huge hailstorm. If it is soft ball-sized hail, there is probably not anything that is going to live through that.
Jason: So are the reductions and premium… if they are to get a hail resistant type roof, are they getting a replacement?
Michelle: They have not done that on the rental side, they do that on the rent over home policies but they have not started the other. I would love to see them do that because a lot of the insurance companies on these landlocked rental homes policies are changing a lot of the hail resistant, the regular roofs. They are changing their stances on them and getting better wrights for different things so I see that in the future.
Jason: Okay, if somebody were to call you today, they were getting ready to buy a property and they needed quote for insurance. You worked different in ‘State Farm’ in that you were shopping multiple policies. (10:58)
Jason: To kind of advise your client on the best fit for them.
Jason: How many carriers would you say that…
Michelle: It goes through multiple. There are two of them that we use a lot but I have 4-5 that we can typically go to. just from seeing the address, that would guide me and give me the top 2.
Jason: You will know the type of wright would be the best policy for that area.
Jason: That makes sense. A lot of investors as they grow their portfolio would own multiple properties. We were talking about the umbrella policies. What are the purposes of umbrella policies and when do you typically see your clients moving into that arena to give you an umbrella policy? (11:41)
Michelle: Okay, let’s say you start out with 2. We probably would put 500,000 liability on each policy.
Jason: Policy itself.
Michelle: When they are up to 4 or 5, that is when I really start encouraging them to go ahead and move into a general liability policy, which if we end up doing will be to split off the liability charge that is on the dwelling policy itself. Then, we would create a separate policy that would be a commercial general liability policy, which would give you the amount to 1,000,000 over 2,000,000. That would amount to whether they had two 1 million dollar claims in an annual term, that is when the policy will pay. Instead of just having the 500,000, then you will have the option…
Jason: Additional coverage.
Michelle: Of a million.
Jason: You are offering mainly more protection in that situation.
Jason: You mentioned it might actually save them a little bit on their actual premiums? (13:05)
Michelle: Yes, if you have just the regular dwelling policy, you will be looking at anywhere from $50-100 deleting the liability coverage.
Jason: Off the bat.
Michelle: Off the bat. And then putting it on to a regular commercial general liability policy for a million dollar coverage and that pricing starts. We usually can put 4-5 properties on it and it gets you $400 a year.
Michelle: Then, if they continue to build that portfolio, I really encourage them to look for an umbrella also. The umbrella typically runs $400/million. Depending on what amount that you feel that you need, I would really encourage that once you get to the commercial general liability.
Jason: Okay, that makes sense. Say Joe is insured under you and a hailstorm came through yesterday and he knows he has to file a claim so he calls you. What is the process like moving forward from the moment he calls you to getting a roof? What is that process typically like and how soon does it usually happen? Obviously, it depends on if it was a huge area and you got a lot of insurance in the area. (14:10)
Michelle: Yes, if it was a huge hailstorm, I will just tell everybody to be patient, they are getting this type of care of as quickly as they can. Depending on if it is a huge storm, we will know the date of loss but a lot of times, the tenants don’t call and tell us when there has been a hailstorm in a certain areas and we might not find out about if for 6 months, the date of loss is critical. Usually, your roofers that will go out will know. So we will need that and whoever is going to be in the contract, whether there is going to be property management or directly to the insured and then we get I turned in. You will usually hear from somebody within a day or so.
Jason: An adjuster.
Michelle: There will set up a time to meet whomever and they will go out to do the estimate. I tell people, if it is an area where there has been hail, the chances are you probably have a totalled roof.
Michelle: Usually, when go ahead and write the estimate, a lot of the adjustors email them to you now. You can look it over and the next day, they typically go ahead and send out a check minus the deductible. Sometimes, there is depreciation on it depending on how old the roof is. Once everything is repaired, then you can send the invoices in and if there is extra due to you from that depreciation, they will send you a second check.
Jason: Okay so it will be prove that the work was done.
Jason: Okay, that makes sense. That covers everything that I have if somebody that is watching this has additional questions or they want to look into getting a policy with you, looking to get quotes. How do they get the contact with you? What is the best method? Email or phone number? (16:21)
Michelle: My email is email@example.com and if you want to call my cell number, 214-212-6423 and I will be happy to answer any questions that I can.
Jason: We will link all that below and there will be a transcript of this podcast as well. Again, if you have any more question, reach out to us, reach out to Michelle. She has done great with my clients in the past so hope it creates some business for her as well. Thank you so much Michelle.
Michelle: Thank you.