The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: curlyfry on March 29, 2016, 11:47:31 PM
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Thanks MMM for being the only person that says this:
http://www.mrmoneymustache.com/2011/06/02/insurance-a-tax-on-people-who-are-bad-at-math/
Our condo building has its own insurance (which I help pay for), so if there was an earthquake & my whole condo building had to be rebuilt (for 5.38 million) the owners would be on the hook for the 10% deductible which would be $538,000. My portion of this would be $18000 or so.
If you are living the mustachian lifestyle (& have a health stash of cash), it doesn't make sense to get insurance coverage for something to pay me $20k (also I'd choose the 10k deductible likely - so then I end up paying monthly to get $10k if something bad happens)
The best deal I can get gives me $60k of personal property insurance but I only own about 30k of stuff. I hate paying to insure myself for stuff that doesn't even exist! (And realistically if something were to happen I wouldnt necessarily want to replace everything).
Obviously I need liability insurance (in case I wreck the whole building & not covered under the buildings insurance)
Just curious if anybody out there just skips the rest & just gets liability insurance? (Unfortunately all articles seem to be written by insurance companies, who want to sell you insurance (& they all seem have certain minimums for their policy which is understandable). But I agree with MMM that it seems a bit of a stupid deal? (For someone who has a decent amount of $ in the bank & is able to keep working to replace any losses)
Thoughts?
Thanks friends!
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Does the building's insurance cover the interior fixtures of your apartment? Here in NYC building insurance is typically "studs in", so you'd be on the hook for flooring, drywall, kitchen etc, in addition to furniture, clothes, electronics. For us that could run upwards of $100k. I follow a slightly different insurance rule from MMM: only insure what you can't afford to replace. Condo interior is big enoug to fall in that category, although it's a moot point because the bank requires it.
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Your lender and your HOA will have the final say. This is an area where I disagree with MMM. The cost of an interior fire or water leak that is not covered by the building insurance can be in the mid-high five figures. It is likely worth the small premium to insure against this type of loss.
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I'm just curious. What is the price differential for the two insurance policies?
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Your lender and your HOA will have the final say. This is an area where I disagree with MMM. The cost of an interior fire or water leak that is not covered by the building insurance can be in the mid-high five figures. It is likely worth the small premium to insure against this type of loss.
This, a million times. Or, if your building has a serious issue and you need to vacate, insurance can help by paying moving costs and a sublet. Our building insurance didn't cover work last year to the tune of 950K, and now we are all on the hook for ~60K. Generally building insurance also doesn't cover if one unit does something to another directly (for example, if your radiator leaks in to your neighbor's ceiling), or if you need finishes redone (ie your floors are ruined from a leak).
City condo living is not something MMM (or most people on this site) have experience with.
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I follow a slightly different insurance rule from MMM: only insure what you can't afford to replace. Condo interior is big enoug to fall in that category, although it's a moot point because the bank requires it.
I agree. Also, people seem to forget that homeowner's insurance doesn't just cover the physical object that is your house. It also covers the contents (which can be massively expensive to replace), and the liability portion PROVIDES YOU WITH FREE LAWYERS to defend against any liability lawsuit you may have the misfortune to be hit with, as well as paying the settlement or verdict (up to insurance limits, but plaintiffs usually settle for the limits). If someone slips on your sidewalk, gets bitten by your dog, somehow falls and breaks a bone while visiting you, etc., you are covered. Review your policy for the details, but that's an overview of how it works. As a lawyer, knowing how massively expensive and stressful litigation is, that alone is worth it for me.
True, the OP asked about liability-only insurance, which if it's available should include that, but he or she is in the unusual position of living in a condo building that's insured. For most people there is no greater entity that insures the exterior of your house; it's all on you, which is all the more reason to get insurance. I just felt the need to post because people always seem to forget that insurance INCLUDES FREE LAWYERS to defend you if you need it.
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Glad you found a good deal, Curly!
I just wanted to add, for anyone here who's a landlord, landlord insurance--which is a special type of homeowner's insurance--also includes lost rent. For instance, if some covered thing (fire, tree branch, whatever) damages your house/building to the point that any unit is uninhabitable, the insurance will pay you "rent" each month while it's being fixed.
Insurance is well worth it, BUT, insurance companies are generally scum and will try not to cover anything that's not obviously covered. So there are pros and cons, but for what is obviously covered it's well worth it, and for what's not obviously covered, argue like hell and consult a lawyer. Also, read your policy before you sign. One major red flag is a policy that contains an arbitration clause, especially an arbitration clause that says anything about how the policy should be interpreted--the courts in most states have established ways of interpreting insurance contracts that are very pro-homeowner, such that if there's any doubt about coverage then you, the homeowner, automatically win. In other words, unless it's absolutely clear that your loss is definitely not covered, the insurance company loses and has to pay your claim. But lately some insurers have started putting in arbitration clauses that not only keep you out of court, but also completely negate those established rules of law, which swings things heavily in favor of the insurer. You do NOT want that.