Jennifer (00:00:01) – Welcome to episode seven of season 17 of The Growing Empire Show. Today I’m here with my special guest Erin Leser, and Erin is the founder of Obi Insurance. Before founding Obi, Aaron successfully launched and grew several companies, guiding them to successful exits. Notably, he’s not only an active real estate investor, but also a venture partner at Pioneer Fund, a San Francisco based venture capital group. Aaron’s remarkable achievements have earned him a place on Forbes 30 under 30 lists, and I’m super excited to talk with Aaron today. So make sure you stay tuned.

Speaker (00:00:37) – Welcome to Growing Empires, hosted by real estate entrepreneur and trusted investment advisor Jennifer DeJesus. Growing Empires provides insight to building wealth through passive income, producing real estate investments for those who want to build and manage a more profitable real estate portfolio.

Jennifer (00:00:58) – Welcome, Aaron to the growing empire. So I’m so glad that you’re here.

Aaron (00:01:02) – Thanks, Jen. Happy to be here.

Jennifer (00:01:04) – Let’s kick off this episode with you, sharing a little bit about your background and some of the work that you’re doing now.

Aaron (00:01:09) – Sure. So I never thought I would end up in the insurance or really the real estate space. I was originally going to go to law school. I was a political theory major, but my brother was was working in the real estate private equity world, and he’s the one that really got the bug into my ear. So that’s how I jumped into the real estate world. And really, OB is the, I would say, the result of the two of us getting really frustrated with our insurance experience as real estate investors. So that’s what we work on today. You know, after spending a lot of time in the really the habitation of the residential real estate investment world, both single family and then, you know, value added multifamily throughout the 20 tens just really felt like insurance was always a black hole, right? It was one of our largest line of expenses, but the one we always felt we had the least amount of control and insight into. And so, you know, Ryan and I were the crazy ones one day to say, hey, let’s, you know, let’s, let’s sell the portfolio and let’s, let’s jump headfirst into insurance.

Aaron (00:02:01) – It can’t be that hard, right? Gotta figure out a way of making this experience a little bit easier, a little bit more transparent, a little bit, a little bit more enjoyable for everybody. So that’s how we got to OB and OB, really today, is an insurance technology company that’s solely focused on the residential real estate investor throughout the country.

Speaker 4 (00:02:17) – Very cool.

Jennifer (00:02:19) – Well, today we’re going to talk about all things that have to do with real estate insurance. And I’m sure we’re going to get into some very interesting stories. And I’ve asked Aaron to join me to share his wealth of knowledge that he gained throughout the years on these subjects. So let’s just jump right in. So as somebody that deeply involved in the insurance sector, what are some of the latest and most unexpected things or trends that you’ve observed in the insurance market? So let’s fast forward to today. I know you we’re going to you know, typically we start and we we start from ground zero and work our way back. Today I want to start at now and let’s we’ll go back the opposite direction.

Jennifer (00:02:56) – So what are some of the things that have most recently came around that you’re just like, oh God, thank God we did this.

Aaron (00:03:02) – Yeah. I mean, not starting it now is, I think a good place to start, especially for insurance. I think, you know, for most of your listeners in the real estate space, you know, times have been, you know, the the you had the good times and insurance, right? For many, many years, I think for the first time ever, which is great for us and kind of exciting now that we’ve become insurance nerds. insurance has become the forefront of what everybody’s talking about, right? Your costs on property taxes, your cost on insurance. And so for us, you know, being able to bring this product in a market the last couple of years, we we were well timed. and I think this is the first time that people are really starting to pay attention to, you know, what am I paying for? How much am I getting? How can I, you know, decrease my costs, you know, how can I limit these these line item expenses.

Aaron (00:03:44) – And so for us, that’s that’s really what we’re focused on today. And I think we take a very unique approach to building this company. And that we look at, you know, your insurance product, one as, as you know, some amount of risk aversion, right? You know, you can you you have that insurance policy to know that if the worst happens, something’s going to be able to to rebuild that property. But you know then beyond that we we really keep our real estate investor hat on. And we look at these properties. And those are the kinds of conversations that we wanted to build and how we trained our team was some people might look at this asset on a cap rate basis, right. When you save them $1,000, you’re adding $20,000 in portfolio value or, you know, asset value, at a certain cap rate. Right? Or what’s the, you know, what’s the threshold of, of risk that, you know, this investor is willing to stomach? how are rents looking? Right.

Aaron (00:04:34) – How’s NOI looking? Can we increase the deductible? Is that something they’re open to or comfortable with and be able to save them money? Then this year, maybe they’ve got some unexpected vacancy, or they’ve got some other projects that are coming in the door. We can try and put more money into their pocket. And so I think taking that type of approach, is really the big thing that we’ve been focusing on as the company continues to grow.

Speaker 4 (00:04:54) – Okay.

Jennifer (00:04:56) – Do you think that the current environment of real estate versus what it was maybe ten years ago, do you think the current environment of real estate should drive the type of insurance you should have on properties?

Aaron (00:05:10) – Oh, without a doubt. I mean, you know, the first thing that comes to mind when you say that right is, you know, short term rental, right? Ten, ten years ago, and even still, unfortunately, ten years ago, no insurance company on earth was going to provide you, you know, insurance on a on a property where you have people coming and going.

Aaron (00:05:28) – Right. I think it will be probably still one of the only insurance providers in the space that’ll cover short term rentals. and I think it’s actually a great risk. But the insurance world, it’s a, you know, hundreds of year old industry, we’re only ten, 15 years into Airbnb at this point. And so that’s something that that we continue to see that, you know, again, as, as the way people operate these homes, co-living has become a lot more attractive for folks, you know, figuring out and utilizing some of the prop tech platforms that have. Come out to, you know, allow people to utilize that the their properties or maybe their vacation homes when they’re not there. those are the things that I think are now driving decision making within the insurance space and really driving up costs on on that novelty. And then I think basically, you know, as you back into the, you know, the traditional, you know, rented dwellings, I think for the first time in probably a couple of years, you’re starting to see the impact of not only weather events.

Aaron (00:06:23) – Right? Everybody looks at their insurance costs. They say, well, you know, it’s hurricanes, especially in Florida, right? Those, carriers are still continuing to leave the state in droves, which is driving up costs. But it’s not necessarily always the hurricanes of the weather events. Right. That can be modeled. It’s that in conjunction with the fact that, you know, you’ve got inflation, right, your materials costs are going up, lumber costs are going up. When you and your insurance carrier agree that you know they’re going to rebuild your home, they’ve agreed on providing this at this specific replacement cost. Well, when suddenly, you know, lumber or materials costs are up 20, 25, 30%. You know, the insurance companies are the one on the hook for that. And so I think that’s really slowed down the way that carriers have have started to operate. They spent a lot more time now looking at these assets. And as a result, because of that uncertainty, it’s really the real estate investors that are getting hit with the brunt of of pretty high, premiums on an annual basis.

Jennifer (00:07:18) – Do you think that that is everything regarding the rise on insurance rates today? Because I can tell you definitely in the last year, for sure, there has been a dramatic increase in insurance rates from property to property. What is driving that? What what’s what is the environment that’s creating that to happen? Is it just the things that you said, the rising cost of materials, the rising costs of replacement value on a property, or is there more to it?

Speaker 4 (00:07:47) – Yeah.

Aaron (00:07:47) – You know, it’s a great question. I think it’s a mix of both. Right. You’re you’re insurance insurance professionals are are are inherently risk adverse people. Right. And so you know, the other way that insurance companies make money is that even though you’re paying a dollar in premium in, they really want to spend less than, you know, 95, $0.90, to actually be paying out those claims. Right. Insurance becomes a very interesting like fixed income products for people that that invest in insurance companies. And so the problem is, is that there’s been a lot of uncertainty over the last couple of years.

Aaron (00:08:19) – This had been bubbling up even before Covid. But but it really, I think, started to to come to a head over the last, you know, 3 or 4 years. So you have the weather events sprinkled in there. You also have some unpredictability of weather events, right? You may have an additional large, California wildfire that you weren’t expecting. There was that big fire in Hawaii. many of your investors who might be in the Texas area will remember that Texas winter storm from a couple of years ago. the unpredictability, those are the things that that, you know, kind of move our, our weather models out of, out of whack. But then, you know, it’s really a couple of additional items. The next is really the increase in, you know, frivolous, litigious claims. Right. roofing claims is a big one inside of the state of Florida. As soon as you have some type of weather event, there are roofing companies that will just go door to door and they’ll say, hey, sign here and I’ll get you a new roof, right? And they’ll go and they’ll, you know, they’ll they’ll submit that out to the insurance company.

Aaron (00:09:14) – And if you’re a homeowner, you’re saying, hey, this is great, right? All I got to do is sign here, I’m going to get a brand new roof. and, you know, legislation was such that, you know, there wasn’t a very discernible definition, right, of that type of like, roofing damage. And so for years, the insurance companies in many states have just been replacing roofs that probably didn’t need to be right. You could have just repaired them. You didn’t need the full replacement. So that’s also been driving up costs. Inflation has been a big one. And then the one that people also aren’t, aren’t super familiar with is that a lot of the the insurance capacity, right. The, the ability and even the reinsurance right. Reinsurance is the insurance effectively on insurance companies to make sure they can pay out those claims? A lot of that comes from the European market, right? It comes from Lloyd’s of London and might come from Munich or Switzerland. And so as the currency markets devalue, right.

Aaron (00:10:04) – And there’s been a lot of flux in that over the last couple of years. You might get the capacity you need from Lloyd’s of London or from Munich. Re right. A the largest reinsurer in the world. But as the pound or the euro devalues against the dollar, suddenly those companies that thought that they might have a five, six, seven, 10% margin, suddenly that’s been completely wiped out. For no reason around weather events or inflation. But simply, again, that that kind of currency, unpredictability and instability. So it’s been it’s been a confluence in a perfect storm that have happened. All of that, I think, is now resulted in the fact that insurance companies are saying, listen, we’re not sure what’s going to happen, so we’re going to start raising rates. I think fortunately, we are starting to see a bit of a light at the end of the tunnel. We had a good and I think, smaller than normal hurricane occurrence in Florida last year, which I think helped to to pad some of these losses.

Aaron (00:10:57) – And so I think starting this year and I think starting into into 2025 and into 2026, people will start to see a leveling of insurance costs and then hopefully even a decrease in some of those insurance costs. as the insurance carriers are able to build up some of their surplus again.

Speaker 4 (00:11:13) – Okay.

Jennifer (00:11:13) – Well, that’s good news. Definitely on the horizon, we hope. Yeah, absolutely. So why are you specifically in the real estate investment segment out of all the segments of insurance? Why the real estate sector?

Aaron (00:11:30) – Oh, it’s a great question. I think first, it’s it’s what we knew, right? It was our lived experience and our frustration. but the second reason was that as we started to dig into why this happened and like, why the insurance experience we have was the way it was, is it’s a really interesting segment, especially the small residential, small apartment, kind of sector for so many of the really large brokerages that exist out there, the publicly traded ones, the massive ones. Right.

Aaron (00:11:57) – There’s so much premium out there. There’s so many properties that are out there that none of those agents and none of those brokers they never wanted to work with, like my single family rental. Right? It was too small for them. A lot of those agents don’t even get commissioned out by the company until the premium hits a 30, 40, $50,000 level. And so even though I felt like I was a business owner, I couldn’t go to these large business brokerages. And so that left me going to to my, you know, local mom and pop insurance agents or, you know, my local state farm. And there’s nothing wrong with that. But their bread and butter is home and auto, right. They know how to take care of you from your personal insurance needs, right? Your life insurance, setting things up correctly for you and your family, the RV and the boat. And so the rental property kind of got bundled into the things that they were working on. And so for their carriers, it just kind of became this like forgotten product in the market.

Aaron (00:12:47) – It’s called an accommodation product. They don’t really want to do it, but they’re going to accommodate you by doing it. And so we felt like that was just really, you know, it felt like real estate investors kind of got the brunt of that. We felt like we were business owners, but that we weren’t really getting the type of product that we needed. And so that’s really where where we came into the picture. We said, there are insurance agents out there that need a product that is specific to this market. We want to make it really easy for them to be able to, to grab a quote. We want their clients to be able to come in and be able to use us as well. and to be able to buy a product that was specific for their use case.

Speaker 4 (00:13:23) – Awesome.

Jennifer (00:13:24) – So you mentioned some of your experiences. I want to go back now and talk a little bit about some of the things that you experience with your own real estate investments that taught you that there needed to be a new direction, or that you needed to do something different.

Jennifer (00:13:39) – So so give me some background on that.

Aaron (00:13:41) – So we’ve had, we’ve had a handful of rentals. Anything from, you know, your, your rental condo unit to a, you know, a multifamily, you know, multifamily apartment building. And I think, you know, for us, even as, even as the market has shifted and even as we had our portfolio, you know, go through the ups and downs of the 20 tens, we found that almost every line item that we had on our panel were things that we could control to some extent. Right? We could go out and grab bids from different property management companies. We could try different vendors. We’re up here in the in the Midwest. We could change out our our snowplow vendor if we wanted to. Right. We could compare those, those rates. But every year we used to get quotes back right a couple of days before the insurance renewal, which was frustrating. And then even to get those quotes, we’d be going through PDFs and Excel spreadsheets and, you know, the poor agent.

Aaron (00:14:36) – Then they come back with a couple of options. Well, as a business owner, I wanted to be able to say, hey, what if I what if I moved my deductible down to $1,000 a year? What if I wanted to move it up to $10,000, $25,000? Right. What is that going to do to the price? What if I want to add or remove some of these different coverages in there? How is that going to impact the price? And the problem is, is that the way the insurance market is set up and still to some extent today outside of of is that every single one of those questions requires the poor agent to have to go back to that carrier and say, hey, can you run these 25 different combinations for my client? They don’t want to do that, right? Like that’s more work for them. And so we always felt like we were a little over the barrel. Right. The lender requires coverage. We get our rates back a couple of days before renewal because the carrier doesn’t want you to shop with with other.

Aaron (00:15:24) – People, and so we always felt like we had to do it right. It was never a good experience. And so Ryan and I spent a lot of time looking at this space, talking a lot of other loners who said, wow, yeah, you know, that’s that’s my experience as well. And so we wanted to build something where, you know, today on OBX, you can get an instant rate in all 50 states. If it’s a 1 to 4 unit structure, multifamily takes a little bit longer. We can’t do it instantly. But almost really anywhere in the country you can get an instantly bind double rate. You can sit there to your heart’s content and play around with the different combinations. And the price is going to deny dynamically change. Because we digitize the underwriting model, we digitize all those rates that otherwise an insurance carrier would have somebody sitting behind an Excel spreadsheet, much like you as a real estate investor, would be sitting there trying to model a potential real estate acquisition. And so we said, hey, like, computers can do this in this way.

Aaron (00:16:11) – Why can’t we? Why can’t we support owners in this type of way as well, especially on a product that, again, nobody likes nobody likes insurance? but if we can make that experience a little bit easier, a little bit more transparent, a little bit more consultative, we figured we’d be able to start, you know, gaining a little bit of market, you know, some market loyalty amongst the clients that are in the space.

Speaker (00:16:36) – The episode will continue in just a moment.

Jennifer (00:16:39) – As an investor, we know it’s important to stay on top of market trends and real estate opportunities that add value to your portfolio. We also know that having a trusted source of reliable information to help you stay a step ahead of other investors is critical to your success. If you’re interested in having these types of resources as well as access to me and my team, I invite you to join the Empire Investment Club, a free service that gives you an easier way to make sense of today’s and tomorrow’s real estate opportunities. As a member of the Empire Investment Club, you’ll get access to relevant resources and investment focused experiences such as live interactive webinars, market trend presentations, and investor socials designed to equip you with what you need to succeed.

Jennifer (00:17:19) – So whether you’re an active investor, passive investor, a combination of both, or just starting out, the club is where you’ll get what you need to build a portfolio you love. To join, just head over to Jennifer DeJesus. Com sign up and we’ll see you in the club where everyone’s on a journey to becoming a better investor.

Speaker 4 (00:17:38) – Would you say.

Jennifer (00:17:39) – It’s safe to summarize that you felt in those moments when you were investing yourself that insurance, the business of insurance, was disconnected from your intent as an investor to look at the numbers or to be cost conscious. Right. It was like this separate segment.

Aaron (00:18:01) – Totally, totally. And I think, you know, so much of that goes back to what I was talking about before, you know, in terms of the the how the market is set up and the types of agents that that really work with this product. And so for us, we never felt like we had an insurance agent that really understood even what a cap rate was, right. Or what net operating income on a, on a small rental property might be.

Aaron (00:18:22) – and so, you know, if one of the pieces of advice I, you know, I always give to folks is find an insurance agent that specializes in this space. There’s a ton of them, right? Obi’s a good one, but we’re certainly not the only ones we, we we also work with a lot of independent agents that we allowed to write our product, but those are folks that also, more often than not, are real estate investors themselves. Right. And so they understand what your goals might be. We have clients that might have, you know, a portfolio of assets where we put them all on one master policy. It’s all scheduled together. It makes it very easy for them. But every single year we also ask them the question. We say, hey, what’s the plan for your portfolio? Are you planning on selling any? Not because I’m worried about losing business, but because I want to say, hey, listen, you know, actually, if we remove that one property from your schedule, your master policy, I might be able to find a cheaper policy for you for that specific asset.

Aaron (00:19:14) – And that’s going to look much better on pro forma for you when you go to sell versus throwing it into like this larger schedule, which is, you know, really there to to help you have some convenience. It’s usually very competitively priced, but it’s also meant to, to make it very easy for you to manage your insurance. But we also want to be that partner in your real estate journey. Right? We want to sit there and empathize. And you’ll get this from agents that that know this space. Everyone that’s been a real estate investor, you know what it’s like to have tenants. You know what it’s like to have people like inside of the property that you own. And as you know, and as an owner and as a landlord, I know that I need to when I, when I do a, you know, a walk through the property or you have one of our property managers to it, we point out exactly where the fire extinguisher is underneath the sink. We show them how to use it effectively.

Aaron (00:20:03) – Right. Because there are people. Not that this is surprising to any of us as real estate investors that have never even thought about that. But when that stovetop fire happens, you want somebody not to run out of your rental property. You want them to open up the, you know, the, the, the, the cabinet underneath the sink to pull out the fire extinguisher and to make that a, you know, an oven or a stove replacement and not a house or a kitchen remodel. Right. Like, these are the things that that people can take active steps on, and your insurance agents going to be able to educate you and say, these are the most common reasons that you might have to file a claim. These are the best ways that we’ve been able to help you, and you advise our clients to help mitigate that, right? You’re never going to be able to stop the tornado or the torrential rain or the hurricane, but you can try and say, these are the steps that you can take to make sure that your tenant’s not going to leave the water on, right.

Aaron (00:20:53) – Show them where the water main shutoff is on the property. Show them how to do that. A lot of people have never done it. They’ve never had to. Sure. So those are the things that we do and we really try and make an effort on.

Jennifer (00:21:03) – You said something so critical that that.

Speaker 4 (00:21:06) – I.

Jennifer (00:21:07) – 100% agree on. And it’s, you know, your insurance broker needs to be your business partner, not just a service provider or a policy provider. And I think that’s so critical because when we talk to investors, we talk about, you know, the strength is in your network, the strength is in your team. Right? You you cannot be a successful real estate investor alone. It just doesn’t happen. You need a large team and part of that team. You know, besides the obvious CPA and attorney is your insurance broker, but you need somebody that’s not just telling you something that is actually taking your investment goals and your investment strategies and the types of properties that you’re buying in the area, that you’re buying them in, and helping you formulate the right type of policy that is going to protect your long term investments because it only takes one fire, one flood, one tenant, you know, mistake to lose everything, to truly lose everything.

Speaker 4 (00:22:11) – Totally.

Jennifer (00:22:12) – So I you know, I second that wholeheartedly. Yeah.

Aaron (00:22:16) – It’s you know, it’s you’re so right. I mean, you’re your insurance agent, your accountant, right? Your attorney, you know, interview them, right? Like, you want to ask them how many, how many rental properties do you guys do? How many do you want to do on a weekly basis? Right. And one of the things that I don’t think a lot of folks realize that are outside of the industry is that. There are real estate investors specific insurance programs that exist out there, right? They are products similarly to to O.B. and even the way that we operate. These are products that have the types of coverages and were built specifically for real estate investors. It’s going to differ from what you find typically on the standard market, because most of the standard market, especially in small residential, it was built off their homeowner’s product. Right. Why do you need personal jewelry coverage at your rental property? Right.

Aaron (00:23:02) – You don’t hopefully don’t have jewelry there, right? But it’s built into the price. And so when you go out and you find an agent that does a lot of work in this space, they’re going to have access to those programs, right? Those programs only want to work with agents that are going to send them a good amount of business. Right. It’s not worth me appointing an insurance agent that might only quote with OB a couple of times a month. Maybe they bind a policy here a couple of times a year. That’s not worth it, right? We spent a lot of time trying to find agents and work with agents that that no one understand this space and so that’s the differentiating factor. Right. And it’s nothing against your personal lines insurance agent, your local state farm person. they probably do a fantastic job on, on your home and your auto and all the standard market carriers. But you want to find somebody that’s in this market because they’re going to have access to things that most others will not have.

Speaker 4 (00:23:54) – Awesome.

Jennifer (00:23:55) – So many real estate investors struggle with or question a lot umbrella policies, different levels of liability, you know, outside the basic just, you know, building policy, right. You know, your your fire flood, you know, etc.. They, they, they struggle with those other policies. Can you break some of them down for me and kind of give your version of, of what is necessary, what is not necessary, and kind of what how you’ve structured things in the past for yourself, but also how you advise investors to structure things for their financial protection.

Aaron (00:24:33) – It’s a it’s a great question. I would say that the first and foremost item that you need, and this is the thing that the lender always requires, that’s that’s your that’s your dwelling and liability coverage. Right? That’s your standard. You know, landlord or real estate investor product that’s going to cover the property and then your liability. What I would say to most folks is at the very least on the liability side, get $1 million in general liability coverage.

Aaron (00:24:57) – A lot of carriers still only limit you to 300,000 or 500,000. Finding a carrier that’ll give you a million bucks. It’s it’s not that much more in cost. But if we think about kind of the litigious nature of the real estate space, the ability to find yourself in a lawsuit, to have even, you know, a very legitimate liability claim that might happen to one of your tenants or a vendor or somebody on your property, you know, 300 or $500,000. It doesn’t go far enough these days. Right? You want to make sure that you have that peace of mind. So that’s the first thing on the dwelling side before we get into umbrellas and some of the other items, you want to make sure that you have enough property coverage. And I can’t stress that enough. for a lot of folks that it might be listed on their declarations page as a dwelling limit coverage a is also the way it might be listed on there. That’s the amount of money that you believe it would take in the event of a total loss of fire.

Aaron (00:25:51) – That’s the amount of money that you think it would take to not only rebuild the property in its current condition, but also clear away, right, the burned out potential structure that’s on the property. And so often we see owners that might have bought a property three, four, five, six years ago. They got their insurance at $80 a square foot. And they’ve never they’ve never increased it. Right. And there’s not a probably a county in the US that you can adequately replace a property right now for less than 110 or $120 a square foot, including kind of that remediation work at the beginning. And so if you’re going to spend the money on insurance, make sure that you have enough coverage, because the thing that ends up happening, especially if you have debt on the property, is that if you have a total loss and you’re at $80, a $90 a square foot, and it’s actually going to cost you $140 a square foot to replace it, your lender might just say, hey, you know what? Just cut me a check for my my portion, right? You might have 40% 30% equity.

Aaron (00:26:49) – Your lender might have the rest. They might say, listen this this borrower didn’t buy enough insurance. We don’t want to deal with this. I’m, you know, they don’t want to be involved in building half of a property. So they might just take your check. And so if you had 150,000 or 200,000 in coverage and you had 50% in equity, the insurance company is only going to give you $100,000. Is that going to be enough to rebuild that? No. Right. So you’ve got this structure. You’ve got this land. You’ve got to try and sell kind of a burned out shell on the property. And you take that check and we’ve seen that happen. And that’s the tragedy. Right? You want to make sure that if you’re spending money on insurance, make sure that you’ve got enough. Right. You really don’t want to skimp on that. So those are the that’s the core product that people have. One of the items you asked about, I think is really important and often overlooked, both on people’s personal lines, coverage, on your home, your personal home and your auto, as well as your rental properties, add $1 million in umbrella coverage.

Aaron (00:27:44) – It’s not that much, right? 60, 70, 80, $100 per the year. That is a nice amount of peace of mind that you can have, and money that is well spent, that in the event something happens. And again, you know, if you’re in a car accident, maybe you caused that accident or it’s at your rental property, the tenant has a guest that that trips and falls on a, on a broken stoop. Right. Or the the concrete had, you know, had had come up and somebody tripped on it, or a vendor might have had an issue on there that is such a powerful tool that you have that otherwise will start to eat into your bank account, your assets. Right. Your life. it is a it is a great piece. We got to a point where, you know, depending on the asset and depending on the legal structure, the properties, we were putting a, you know, $1 million umbrella, on each one of these assets for, you know, for anybody that’s out there individually again, that million dollars, $2 million, even $5 million, it’s not that much you can ask your agent to do it.

Aaron (00:28:46) – it’s not a product that I think they sell probably often enough to people, but I think definitely as a real estate investor, with that added exposure of you having folks that are living in a property that you own and it’s your responsibility to maintain it’s great peace of mind, for a really reasonable price.

Speaker 4 (00:29:04) – And what does.

Jennifer (00:29:04) – The umbrella policy do different than the dwelling policy?

Aaron (00:29:09) – Great question. So your umbrella is really over top of like your liability. Right. So an umbrella policy is not going to come into play because you know you didn’t have enough dwelling coverage on the property. Right. Every every landlord policy is really broken down into those two parts. That dwelling in that liability. Right. The property and the liability. Your umbrella policy is going to work effectively as an umbrella or excess over top of your liability policy. So if you have that million dollars in liability coverage, if you have somebody that trips and falls, or maybe you’ve got a pool on your property or a trampoline or some of these other items that that you know, have historically caused challenges for folks.

Aaron (00:29:48) – If you start to exceed that million dollar limit on the policy you already have, that’s when you get to tap into your umbrella coverage.

Speaker 4 (00:29:56) – Okay.

Jennifer (00:29:57) – Since you already touched on the subject, what are some of the things that you should avoid to to have less risk? You talked about trampolines and poles. Should we be avoiding properties with those things? Should we be writing those things into our leases that that tenants cannot have these things?

Aaron (00:30:16) – You know, I would say it’s a, it’s a great point. I think trampolines has been a big one for a, you know, a very long time. Right? Trampolines, especially became very popular in the 90s. And I think insurance companies finally figured out that, you know, jumping really high and then falling four feet off the ground again, off the, off the trampoline was going to cause some injuries. So, yeah, I mean, definitely writing in something around the trampolines or something that, you know, things you can’t do without express written permission from the actual owner.

Aaron (00:30:43) – those are the best things that you can do because you are at least providing that added layer of protection that you threw it in there. Right? The condition is provided, as you know, as is. And any modifications, any additions to the property, you know, including a trampoline, are things that you would have to get permission for, pools, especially as a real estate investor. I have never found that even personally in my in my life to be worth it. Right. number one, it’s it’s a lot of maintenance. I, you know, we know some folks that have invested in those properties before, especially single family rentals. And it’s it’s a headache, right? you don’t know how that tenant’s ultimately going to take care of that pool and the pool equipment and some of the the machinery that goes along with that. And then I would say the other thing that you really want to do, and we touched on this a little earlier, is control the pieces that are within your, that are really within your purview.

Aaron (00:31:37) – Right. Control those potential claims. Right. Because people end up losing their insurance or their premium goes up because because you file claims, right. And because the exposure on the property becomes a, or gets to a point where the insurance carrier just isn’t interested in covering that property anymore. So we touched a little bit on the on the fire extinguisher. That’s a great one. another one, we’re big fans of our, our things called fire stops, right? There are these tiny little hockey puck like items. They’re magnetic. They stick, right underneath the, the hood vent, over top of your stove. in the event for any of your listeners that might not be familiar with it in the event that the stove has, or gets to a temperature that, would indicate that there’s some type of open flame or fire, the fire stop will actually disperse a massive amount of powder that will immediately extinguish that fire. it’s like $20 for a pack of, you know, 2 or 3. They last for 5 or 6 years.

Aaron (00:32:33) – Great investment. Because again, when your tenant who you show, you know, you, you, you took the effort to actually show them where the fire extinguisher was. Maybe you provided them a fire blanket that might be underneath that, that sink as well. They still run out of the unit and you’re going to potentially have a kitchen fire. That fire stop is like that really last line of defense. And we’ve seen it. We’ve seen it save kitchens. We’ve seen it probably save houses. that’s a big one. and then the other one too, that I might have mentioned is, you know, where’s the, you know, where’s the water shut off, right. I can’t tell you the number of tenants that I’ve even met in my life that to no fault of their own, they’ve never been a homeowner. They’ve always rented. No one ever told them that. That little tiny knob behind the toilet, if you turn it to the right, will actually stop the water. Right. And I don’t mean that in a bad way, but it’s just if if you’ve never done it and you’ve never experienced it and you never had a, you know, a toilet overflow or a water backup.

Aaron (00:33:26) – You don’t know what to do. You’re sitting there like trying to trying to scoop the water into the, you know, into the into the tub or into the sink. so that, you know, those water shut off items, the the water main shut off item. those are the things, right? Your water events and your fire events. The biggest reason that people make claims outside of weather events. So take the active steps that you can to try and mitigate some of those potential damages.

Jennifer (00:33:49) – Thank you for listening to part one of a two part segment with my special guest, Aaron Lazar, founder of Obi Insurance. Make sure you stay tuned on our next episode where I continue my conversation with Erin. And until next time, take care.

Speaker (00:34:06) – For more information about how Jennifer can help you plan, develop and manage a strong real estate investment portfolio, visit Growing empires.com.

You can learn more about our special guest here.