Certificate of Insurance
If you hire someone to do work in your rental units
or any subcontractor (your own personal home is not a bad idea either), get a certificate of insurance naming you as an additional insured at the very minimum. If you are risk management conscious, have them sign an indemnity agreement and a waiver of subrogation. If this situation above happened to you and you hired a licensed person to do the work, it will not keep you from getting sued just because you hired a qualified licensed individual. The three items mentioned above will help you to pass the risk on to those people who do the work. If they refuse, consider who you are hiring? Most insurance policies for trades, allow for contractual liability which gives you the power to pass the risk onto them. It is much easier to manage a risk on the front end rather than deal with a large claim and probable policy replacement at a higher premium. Speak to your legal council for specific wording to use.
It is important for insurance companies to know the past history of who they are going to insure. A CLUE report (Comprehensive Loss Underwriters Exchange)give personal lines underwriters a way to know what claims have been filed in the last 5 years. Sometimes, credit is also ordered. There is a lot of debate about the use of credit regarding insurance, but by and large it is a good predictor of who will have a greater frequency of claims. If you think about it, the one who is struggling to pay his/her bills will have to make some hard decisions about paying the mortgage or getting that new roof that is ready to leak. Is it failsafe and completely accurate? No, but neither are credit checks for mortgages as well as screenings for new tenants. A CLUE report is only used for personal lines. Much like many businesses, insurance companies also deal with the 80/20 rule. 20% of the insureds make up for 80% of the claims. The clue report is NO secret. It fails under the same regulations of The Fair Credit Reporting Act. If you are denied or asked to pay a higher rate than what was quoted because of information that was found in the report, you have the right to get a copy of the report and use the same methods of dispute as a credit report. If you find that you are being asked to pay a higher rate, get a copy of the report. You may find that you are being charged for a claim that the prior property owner had. This is just cause to dispute it. I found that an accident that my ex-wife had in a car that was registered to me, came up as MY accident. I disputed it, and was prepared to show documentation that it was not my accident. The insurance company failed to respond to the dispute within 30 days and by law the erroneous record was removed from my report. Personally, I do not believe the insurance companies can handle disputes on a consumer report in a timely matter the way a financial institution can.
Commercial lines underwriting is done with 'loss runs' (a history of claims from the current insurance carrier). A new business entity will not have loss runs. For this reason some insurance companies will not entertain a new business. However the soft insurance market we are in today has a lot of commercial insurers loosen tight restrictions.
Personal lines (auto or homeowners insurance) are not allowed to arbitrarily raise rates. Typically most homeowner insurance companies have a preferred rate and a standard rate. In order to fit in preferred for most companies, it has to be a newer home, no claims in the last 3-5 years, and over a certain value. Some companies will put an older home in preferred if it has been updated. Ask your agent what the underwriting guidelines of the companies they use. The typical price difference between preferred and standard is about $150 a year. These rates and rules are filed with the Dept of Banking and Insurance. They can not deviate from the filed rates. The same does NOT hold true for commercial lines.
I hope this shed a little light on how and why insurance companies charge what they charge. Personally, I think that Homeowners insurance is still a bargain. You are getting the replacement value of your home multiplied by 2 (other structures @ 10%, personal property @ 70%, and loss of use 20%) and $300,000-$1,000,000 in liability for under $1,000 for a $300-$400k home. Most businesses can't insure a building that size with liability for near that price.
It is important for insurance companies to know the past history of who they are going to insure. A CLUE report (Comprehensive Loss Underwriters Exchange)give personal lines underwriters a way to know what claims have been filed in the last 5 years. Sometimes, credit is also ordered. There is a lot of debate about the use of credit regarding insurance, but by and large it is a good predictor of who will have a greater frequency of claims. If you think about it, the one who is struggling to pay his/her bills will have to make some hard decisions about paying the mortgage or getting that new roof that is ready to leak. Is it failsafe and completely accurate? No, but neither are credit checks for mortgages as well as screenings for new tenants. A CLUE report is only used for personal lines. Much like many businesses, insurance companies also deal with the 80/20 rule. 20% of the insureds make up for 80% of the claims. The clue report is NO secret. It fails under the same regulations of The Fair Credit Reporting Act. If you are denied or asked to pay a higher rate than what was quoted because of information that was found in the report, you have the right to get a copy of the report and use the same methods of dispute as a credit report. If you find that you are being asked to pay a higher rate, get a copy of the report. You may find that you are being charged for a claim that the prior property owner had. This is just cause to dispute it. I found that an accident that my ex-wife had in a car that was registered to me, came up as MY accident. I disputed it, and was prepared to show documentation that it was not my accident. The insurance company failed to respond to the dispute within 30 days and by law the erroneous record was removed from my report. Personally, I do not believe the insurance companies can handle disputes on a consumer report in a timely matter the way a financial institution can.
Commercial lines underwriting is done with 'loss runs' (a history of claims from the current insurance carrier). A new business entity will not have loss runs. For this reason some insurance companies will not entertain a new business. However the soft insurance market we are in today has a lot of commercial insurers loosen tight restrictions.
Personal lines (auto or homeowners insurance) are not allowed to arbitrarily raise rates. Typically most homeowner insurance companies have a preferred rate and a standard rate. In order to fit in preferred for most companies, it has to be a newer home, no claims in the last 3-5 years, and over a certain value. Some companies will put an older home in preferred if it has been updated. Ask your agent what the underwriting guidelines of the companies they use. The typical price difference between preferred and standard is about $150 a year. These rates and rules are filed with the Dept of Banking and Insurance. They can not deviate from the filed rates. The same does NOT hold true for commercial lines.
I hope this shed a little light on how and why insurance companies charge what they charge. Personally, I think that Homeowners insurance is still a bargain. You are getting the replacement value of your home multiplied by 2 (other structures @ 10%, personal property @ 70%, and loss of use 20%) and $300,000-$1,000,000 in liability for under $1,000 for a $300-$400k home. Most businesses can't insure a building that size with liability for near that price.