Office: 209-464-9441
Cell/Text: 209-992-1301
Property Insurance: Make sure it covers “Natural disasters,” and other suggestions
HOW TO MAKE SURE YOUR LANDLORD INSURANCE COVERS NATURAL DISASTERS
Source data provided by: Insurance Information Institute (III)
Scientists note that natural disasters — hurricanes, forest fires, floods — are increasingly common due to climate change. In 2019, the Insurance Information Institute (III) listed 90 natural disasters in the U.S. that claimed almost $50 billion in damage. Only about half of the losses were actually covered by insurance.
Natural disasters are unpredictable and catastrophic, two conditions that encourage property owners to transfer the risk of devastating losses to insurance companies. The companies subsequently spread the risk of major losses throughout the insurance industry through reinsurance contracts.
RENTAL PROPERTY OWNER RISKS
A natural disaster exposes a landlord to three types of losses:
- Property repairs and replacement
- Lost income
- Tenant liability claims
PROPERTY REPAIRS AND REPLACEMENT
Repairs for structures range from cosmetic damage to the total loss of property. Acquiring the proper insurance coverage for all kinds of natural disasters, including wind and flood, will offset potential financial losses, especially if you do have to sell your property as a result of the natural disaster.
Basic landlord insurance varies on the hazards and amounts of coverage, necessitating a clear understanding of coverage definitions, requirements, and exclusions. Property owners should seek coverage that either replaces lost items as new or compensates the insured with the full replacement value in cash.
Although insurance may relieve some of the pain associated with a natural disaster, landlords should take measures to limit physical damage as much as possible. For example, landlords with property in hurricane-prone areas should keep trees trimmed, install hurricane screens and shutters, and store any physical objects that might be windborne. A landlord with property subject to forest fires needs to create a defensible space when landscaping and have an evacuation protocol that includes turning off utilities.
LOST INCOME
Property is often uninhabitable after a natural disaster until restored. Lessees are forced to seek shelter elsewhere even if they are bound to their lease. Tenants living in states that have adopted the Uniform Residential Landlord and Tenant Act (revised in 2015) are automatically relieved from rent payments after they vacate the property. In either case, property owners should expect tenant resistance to paying rent for property they cannot occupy.
Standard landlord insurance typically does not include rent income lost during tenantless periods. In some cases, property owners can purchase rent loss insurance separately or as a rider. The insurance may extend beyond losses resulting from a natural disaster to any event of lost rent.
TENANT LIABILITY CLAIMS
Justified or not, tenants may bring claims against their landlords for lost property or physical injury due to a natural disaster. Anticipating claims and taking preemptive actions to avoid or minimize costly lawsuits is the best protection.
Preparing tenants for potential disasters can avoid potential personal and property losses, that might otherwise occur and reinforce tenant relations. Steps to take include:
- Public notices that explain how renters might be affected by a natural disaster including their rights under the Universal Landlord and Tenant Act if applicable.
- Installation of appropriate protections such as smoke and carbon monoxide detectors, fire alarms, fire extinguishers as needed, and security cameras.
- Written evacuation procedures in emergencies with identified safe areas to ensure that all tenants can be located. Each renter should be required to provide off-site contact information in the event of evacuation or displacement.
- Tenant assistance to list, identify, and photograph personal property for insurance purposes.
PREEMPTIVE LANDLORD ACTIONS TO MITIGATE NATURAL DISASTERS
Lost income and claims of liability are usually minimal or absent in most property insurance, though coverage is generally available at an extra expense.
Landlords can avoid potential tenant issues by requiring each tenant to maintain renters insurance as part of their lease to cover lost or damaged property and extra rental costs while they are displaced from the property. This is a relatively inexpensive way to ensure that tenants’ belongings are protected; remind tenants that your insurance will not cover their personal belongings (many tenants assume that it will).
UNDERSTANDING INSURANCE COVERAGES
Property insurance contracts are complex and confusing and filled with paragraph after paragraph of legalese and boilerplate language. Collection on a policy can be especially difficult because most insurance companies resist paying large claims. Property owners often believe they have better coverage than they actually have. For example, flood insurance is not included in a typical policy; it must be acquired separately as a rider or a new policy.
A thorough knowledge of the coverage – what is covered and for how much – is essential for full protection. Just as homebuyers are served by engaging an attorney to review home purchase agreements, landlords engage attorneys who specialize in insurance to look over policies and make recommendations for improvements. Those tempted to disregard an attorney consultation due to expense may find themselves penny-wise and pound-foolish. Good advice from an expert is always beneficial.
A good insurance attorney provides a backstop for your agent, identifying lapses in coverage, saving you money by eliminating contingencies, and possibly protecting you from lawsuits years down the line.
SELECTING THE RIGHT INSURER
While the insurance agent is the person that property owners and managers most often contact, the company behind the agent is equally important and should be considered. All property insurers and agents are required by law to register with the state and regularly produce financial and consumer reports for the regulating agency to ensure their solvency (ability to play claims as required).
Despite the regulations, insurers significantly vary in size, targeted markets, and customer service. Before agreeing to a contract, property owners should check with their State Insurance Boards and consumer reporting agencies such as the Better Business Bureau for past and current legal actions, complaints, and filings that affect their ability or willingness to deliver the protections advertised.
Recommendations from current property owners who have experience with an insurer should always be investigated.
COST OF PROPERTY INSURANCE
The costs of property insurance can vary significantly from one insurer to the next. Costs for multi-family properties can range from $1,000 to $3,000 per $1 million of value depending on:
- Location of the property. Premiums for property located where natural disasters are frequent and devastating such as California and Florida (fires and hurricanes, respectively) are usually more expensive than in regions of less activity.
- Age and condition of physical property. Older buildings typically lack the latest safety design for structural integrity, fire-resistant materials, and safety systems developed to resist or minimize damage from a natural disaster.
- Current value of property. Premiums typically rise as the value of the property increases, i.e., the premium for a $10 million building is higher than the premium for a $5 million building.
Calculating and maintaining profitability ratios is one way of ensuring that property insurance costs are in line with expectations.
FINAL THOUGHTS
In many ways, running a rental property is like running other small businesses. The key to profitability is having good management and the right tools. With those elements in place — including being sure you are protected in the event of a natural disaster — your only worry will be managing your money correctly.
Norbert G. Huston
Huston Associates Real Estate Inc. DRE#01059682
Residential Property Management Services since 1963
3138 Pacific Ave, Stockton, CA 95204
Office Hours: Monday-Friday 10am-1pm; 2-6pm (excluding holidays)
Office: 209-464-9441 Cell/Text: 209-992-1301
Property Owners: Mgmt/Tenant Placement Svcs
Challenging the Misconception
CHALLENGING THE MISCONCEPTION:
AMAZING LANDLORD RESPONSES TO COVID-19
It is often lost on society that property owners and property managers provide an essential service. Often, landlords go above and beyond for their residents year-round. Yet, in this season of uncertainty we see landlords help tenants in grander and amazing ways that deserve to be shared.
There exists a misconception that rental housing owners enjoy large margins and can continue operating in the absence of rent payments, and with so much discussion around rents during COVID-19, the National Apartment Association (NAA) has released resources to use to help explain the breakdown of $1 of rent.
Because education remains an effective way to counter talk of rent freezes and rent strikes and battle the perception that owners are greedy with no concern for their residents, NAA offers this explanatory video and companion infographic breaking down a dollar of rent into its component parts.
RENT FORGIVENESS IN THE NEWS
Property owners with the financial means have been overwhelmingly generous. These landlords help tenants by offering rent forgiveness in light of the difficulties and struggles renters are facing due to the pandemic.
LANDLORDS OFFERING PARTIAL RENT CONCESSIONS
In some cases, it just isn’t feasible financially for a landlord to offer a full month’s rent so some are offering discounts in the form of a partial rent forgiveness.
BUT WHAT IF I CAN’T OFFER RENT FORGIVENESS?
It is a misconception that all landlords have amassed great wealth and can handle not collecting rent.
While some lenders are allowing landlords to defer mortgage payments, and even with governmental business incentives, sometimes offering rent forgiveness may be understandably out of reach because:
- Rent payments cover property taxes, maintenance, or utilities
- Profit margins have been to thin to create a savings cushion
- Rental property income is used to keep the landlords’ family afloat
- Rental Income might be their only source of income
- They may be self-employed and in need of assistance if rents aren’t collected
And that’s ok. There are still many small things a landlord can offer to extend a helping hand and show tenants they care.
START WITH A THOUGHTFUL APPROACH TO TENANT HELP
Evaluate the long-term consequences and goals for the short term good. For instance, evictions, tenant turnover, and vacancies are very costly for landlords, so efforts and resources you put into helping your tenants now may save you a great deal of money in the future.
The two important concepts to remember are to:
Be consistent with all your residents on what you offer to avoid discrimination.
– and –
Think about what you can offer and then only offer what you can afford in light of your resources.
PAYMENT ARRANGEMENT SUGGESTIONS:
With unemployment benefits, stimulus checks, and tax refunds, tenants might just need a little time to meet their rent obligation. Landlords help tenants by offering:
- Customized rent deferred payment arrangements and waiving late charges
- A freeze on rent increases
- Resource information to direct tenants to government aide, charities, and agencies that help tenants pay rent
It is reasonable to expect that rent payments will be increasingly challenging for many as unemployment increases because of COVID-19, and with May 1 right around the corner, the apartment industry must help society understand the benefits of rent payments for all Americans, whether or not they reside in rental housing.
From property taxes that finance schools, emergency services and other local needs, to investor returns that include public pensions and 401(k)s, as well as the dollars put back into the community to ensure quality living for residents, a rent payment is much more important than one might otherwise realize.
Huston Assoc. Real Estate Inc. DRE#01059682
Residential Property Management Services since 1963
3138 Pacific Ave, Stockton, CA 95204
Office Hours: Monday-Friday 10am-1pm; 2-6pm (excluding holidays)
Office: 209-464-9441 Cell/Text: 209-992-1301
Property Owners: Mgmt/Tenant Placement Svcs
Need money during coronavirus pandemic? How to avoid loan sharks and debt traps
Need money during coronavirus pandemic? How to avoid loan sharks and debt traps
Experts advise people who are suffering lost income during the coronavirus pandemic to avoid high-APR payday loans.
Most payday loan offices in California are in zip codes with above-average poverty rates. As unemployment surges due to the coronavirus, people are vulnerable to costly schemes.
As millions of Americans lose jobs, shifts and other sources of income during the coronavirus health crisis, financial experts worry that people will be preyed upon by loan sharks who stand to profit.
“We saw this during the foreclosure crisis, where people were in distress and scammers took advantage to promise to help people connect to relief for a fee they could not afford,” said Kevin Stein, deputy director of the California Reinvestment Coalition, a San Francisco-based nonprofit that advocates for protecting consumers.
In 2018, there were 133 payday lenders in the central San Joaquin Valley, according to California records. But there were nearly 198 of them ten years earlier, when the valley began feeling the effects of the 2008 recession and spiking unemployment.
Statewide, California has 1,645 licensed locations offering payday loans, according to the Department of Business Oversight, and the number has declined by a quarter over the past decade.
Payday lenders in California under state law can loan up to $300 and charge a maximum of $45 in fees, according to the Department of Business Oversight. The average annual percentage rate (APR) for payday loans in the state was 376% last year, which is exponentially greater than the APR for most credit cards.
The payday loan industry says its businesses provide a needed service at an affordable cost. But advocates argue they prey on financially vulnerable families. Most payday loan offices in California are located in zip codes with above-average poverty rates.
A weekly record number of Californians, almost 187,000, filed initial claims for unemployment insurance last week, according to the U.S. Department of Labor.
By June, private-sector job losses could climb to more than 55,000, or 11% to 12% of employment in the central San Joaquin Valley, according to a Sacramento Bee analysis of a recent Economic Policy Institute study.
“We’re facing one of the worst unemployment crises we’ve ever seen,” said Adam Briones, director of economic equity at the Greenlining Institute in Oakland. “I think it goes without saying that when families are in crisis, those payday lenders are some of the easiest ways to get money quickly. It’s really tough to get out of that debt though.”
A new law enacted last year caps interest rates at 36% for loans from $2,500 to $10,000, but it doesn’t apply to payday lenders, only larger lenders.
If you were recently laid off and need a loan, experts have advice on how to get help without falling into a debt trap.
Go to your bank or credit union first
If you’re struggling to make a payment, contact your lending institution first. Rosa Pereirra, branch manager of Self-Help Federal Credit Union in Fresno, said they have allowed all their members to skip their payments in April like they sometimes do during the holidays.
“I would beg the public to call the institution they already owe the payment to because a lot of them get frantic,” Pereirra said. “We’re telling them, take care of yourself, stay home. I can promise you 99% of lenders have a way they can help people skip their payment.”
Banks including Wells Fargo, Citi, Chase and Capital One are encouraging cash-strapped customers to contact them to see what they can work out. Many can offer hardship plans, which could mean lower interest rates or smaller fees.
Briones, from Greenlining, said banks may not offer hardship plans offhand, so clients should do their research first, and ask for what they need. For additional resources, seek out the Department of Housing and Urban Development approved housing counselors or credit counselors from nonprofit organizations.
Regulators are also responding to this pandemic by asking large banks and community development financial institutions to start offering small-dollar loans. Briones said clients should ask their banks for a small loan before resorting to a payday lender.
“Wherever we’ve seen payday lending it does lend itself to predatory lenders. But if it is large national banks making small-dollar loans, at the very least there is a regulatory aspect. There’s a structure there,” he said. “Where we worry the most is non-bank lenders that aren’t regulated at the federal level and have much less accountability than large national lenders.”
If lenders ask for a canceled check, that’s a red flag, according to Pereirra from Self-Help Federal Credit Union.
“Most banks and credit unions are able to make a direct deposit. A lot of predatory lenders go ahead and want to have access to your account. With a check, they have the routing number and account number so they can try to pull it several times.”
Pereirra said small loans typically should run between 2.5% to 10%. If a rate exceeds 20%, she encouraged consumers to reach out to a credit union for refinancing help.
“I just saw one at 480% APR,” Pereirra said. “A lot of times we’re able to pay their high rate loans off.”
The Consumer Financial Protection Bureau has also created multiple guides on navigating loans and debts.
Coronavirus aid available
Trump signed a $2 trillion coronavirus stimulus bill on Friday with significant relief for families and small businesses.
Individuals who filed their 2018 or 2019 taxes can receive a check of up to $1,200, plus $500 for each child. You can calculate how much you receive here.
For many, advocates argue, that won’t be enough to cover rent or other expenses.
“We’re really concerned because we feel that for an economic recovery package to make an impact, those funds need to be consistent. We think families are going to need 12 to 24 months of payments to make it out of this economic fallout,” Briones said.
For now, however, that payment is a one-time deal.
The stimulus also includes $10,000 loans for injury disaster relief through the Small Business Administration to provide paid sick leave to employees, maintain payroll and make rent or mortgage payments. You can apply through SBA.
“This is a historic move on the part of SBA,” said Tara Lynn Gray, Fresno Metro Black Chamber of Commerce president. “You can apply for the loan, not yet have an answer and within three days get $10,000. If you end up not qualifying, they don’t come after you for $10,000. That is unheard of for small businesses. And SBA loans are very difficult for us to get. Most people of color struggle greatly to get those loans.”
The Fresno Metro Black Chamber of Commerce and Downtown Fresno Partnership have listed other resources for small businesses on their websites.
Manuela Tobias is a journalist at The Fresno Bee. This article is part of The California Divide, a collaboration among newsrooms examining income inequity and economic survival in California.
Huston Assoc. Real Estate Inc. DRE#01059682
Residential Property Management Services since 1963
3138 Pacific Ave, Stockton, CA 95204
Office Hours: Monday-Friday 10am-1pm; 2-6pm (excluding holidays)
Office: 209-464-9441 Cell/Text: 209-992-1301
Property Owners: Mgmt/Tenant Placement Svcs
We’ve been heard by the federal government; now an “essential service.”
Federal guidelines used by the states has been very silent regarding “real estate activities” except for one sentence that stated that those that provide services to the homeless population can still operate. Being a property management company which does provide housing for homeless individuals and families that are on voucher programs meeting our criteria and qualifications; has been my justification for having my office open during our normal business hours. Contact with the public is still minimal, abiding by the guidelines set for number of people gathering together, etc. Our office also continues to respond to our residents requests for service calls with plumbing, pest control, etc. The following news article below confirms that “Real Estate” IS an essential service.
Real Estate Now Listed as an Essential Service in March 28, 2020 Federal List of Essential Critical Infrastructure Workers
Today, the U.S. Department of Homeland Security Cybersecurity and Infrastructure Security Agency (CISA) updated its list of essential services during the coronavirus (COVID-19) crisis and expressly included residential real estate. Since Governor Newsom’s March 4, 2020 order incorporates this list, the order now includes residential and commercial real estate, including settlement services, as essential services in California. However, if a city or county has an order with a more restrictive standard regarding what qualifies as an essential service, or more restrictions on activities, those guidelines will still govern the activities of a licensee. You can read the full CISA memorandum here.
Notwithstanding this new development, all real estate licensees must take into account the health and safety of their clients and fellow licensees, and follow the existing protocols for protecting against the spread of COVID-19. If such health safeguards and protocols are not followed, the rule for the state could easily change to stop or restrict all real estate activity. To that end, in conformity with current health guidelines, real estate licensees should follow all CDC and local health mandates.
1. No open houses should be held.
2. Showings should be done virtually, if at all possible.
An updated FAQ and more information on recommended best practices will be posted on the car.org/coronavirus website as soon as practicable. March 28, 2020
Norbert G. Huston, Broker/Realtor
Huston Assoc. Real Estate Inc. DRE#01059682
Residential Property Management Services since 1963
3138 Pacific Ave, Stockton, CA 95204
Office Hours: Monday-Friday 10am-1pm; 2-6pm (excluding holidays)
Office: 209-464-9441 Cell/Text: 209-992-1301
Property Owners: Mgmt/Tenant Placement Svcs
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