The world has faced catastrophes left and right the past few years, so if the next one rolls around, you have to make sure you’re as protected as can be. Taking out insurance policies for your assets grants you an extra layer of security just in case the worst happens, so you have to be smart about how you’re implementing these insurance policies. Amber Seggie is the Area Vice President at Gallagher. Joining Monick Halm, Amber goes in depth about various insurance policies and structures investors should consider. With these tough decisions to make, you have to make sure you’re going in informed. Let Monick and Amber help you take a look at the big picture.
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Protect Your Property And Yourself With Insurance – Interview With Amber Seggie
I am here with a special guest. The reason I brought her is that as property owners, we need to be prepared for the unexpected. Things happen. A tenant might slip and fall, might have a fire, a hurricane could hit and flood your property or your dog could bite someone. If you’re not prepared for the unexpected, you could lose your property or worse. Good insurance is the first line of defense against the unexpected and our guest, Amber Seggie is an expert in helping investment property owners and others protect their properties, businesses, and personal assets through insurance. I’m going to say that she’s my insurance agent and representative. I’m happy to have her here. She’s going to share the most important things any property owner must do to protect themselves and their assets with insurance.
She is the Area Assistant Vice President at Gallagher and holds the Associate and Risk Management Designation. She works with middle-market businesses to strategically structure insurance and risk management programs. She had the pleasure of working with clients across a variety of industries, including property owners, manufacturers, distributors, restaurants, nonprofits, etc. Additionally, she’s actively involved in her community as a member of the Orange County United Way Emerging Leaders Council and an appointed board member of Hands Together, a nonprofit in Santa Ana, California. She lives in Orange County, California with her husband and two sons. I’m so thrilled that she has taken the time out of her busy schedule to be with us. Welcome, Amber.
Monick, thank you.
Insurance is super-duper important for investors. How did you get started in insurance?
We have a running joke that most people either fall into insurance on accident or they have a family member in the business. Not many people go to school and say, “I want to be an insurance broker.” It’s not a sexy industry if you would. For me, it was the latter. My father has been in the industry for over 30 years so I like to joke that I was born into it. Throughout my early childhood, high school and college, I interned at his agency. I know the ins and outs of the business side. Anything from being a receptionist to an admin. I interned in the accounting department. I got to see a lot of the business. About a few years ago, an opportunity came about and that’s when I dove into becoming a broker. I worked with fitness studios and fitness instructors, placing coverage for them. I grew up with a dance background. I understood their world. It was a fun way to blend my personal interests and learn the technical side of the business. From there, I managed the Main Street business unit at my father’s firm and now I work on the core team at Gallagher with middle-market companies and including property investors like yourself.
To explain to the readers, what does middle-market mean?
Whether you’re a banker, insurance for every advisor has a different definition of middle-market but on average, that would be clients that are upwards of $10 million in revenue and 30 to 50 employees. From the property investment side, you may not have employees and your revenues might not be $10 million but it depends on the size. If you’re thinking about $50,000 and insurance premiums, that’s probably about where we’ll start to be able to make an impact with regards to risk management, structuring programs and things like that.Good insurance is the first line of defense against the unexpected. Click To Tweet
Why is insurance important for property investors?
Insurance protects you and your investment. As a property owner, you probably fronted a decent amount of money into these properties. You have a vested interest in making sure that you continue to receive rental income, and have this asset if you’re living in it if you’ve invested in your own home. You want to make sure that you’re protected in the event of a loss, either a loss to the property, for a fire, flooding, or third party liability. If someone slips and falls on your property for those types of things. As a property owner, you have a vested interest in making sure that your asset remains as it is and if it doesn’t, you want to be sure that that investment has been protected accordingly.
What type of insurance somebody should have? Let’s say they’re investing in a single-family or duplex, triplex, or that kind of thing? What type of insurance would you recommend for them?
Across the board, whether it’s a home that you live in or a larger apartment complex, there are a few different coverage types that you want to be sure that you have. There’s General Liability Coverage, that protects you in the case of a third party claim, so if someone slips and falls on your property. You want to protect your interest in the property itself so your first-party coverages like building coverage. It’s making sure that if the building either suffers a partial or total loss that you have coverage for that. If you are renting it, you’re not occupying the residence yourself, you can protect your loss of rental income on a property form.
In general, an umbrella a lot of times is necessary to increase the limits of your liability coverages. Whether it’s a small complex or a larger one, those are some of the standard coverages that you’d expect to see or you’d want to make sure you have across the board. Where some of the nuances come into place would be depending on where you’re located. If there’s a potential for catastrophes. A flood if you’re in a flood zone. You might want flood coverage or earthquake coverage if you’re in California. Some of those things aren’t included or are specifically excluded on your standard package.
You want to make sure that you understand some of your catastrophe exposures. If you have employees or if it’s a home that you’re living in, you want to protect your content, but if you are renting it out to someone else, you have a different liability exposure and they would probably want to protect their content. Depending on who’s occupying it might make a need for different coverages. Are you planning to do any construction or remodel? Different things like that might trigger the need for different coverages as well.
Let’s say you’re doing a remodel or you get a property and you’re flipping it, what kind of insurance would you need for that?
One of the important things to know is if you’re doing construction on a property, a lot of times, you’ll want to get what’s called a Builder’s Risk Policy. That covers your liability while the properties under construction and also making sure you have the property coverage during the course of construction. That’s not typically contemplated in your standard package policy that you have for the ownership of the home or whatever property it is. If you’re doing the construction yourself, that’s one thing. If you have a contractor, you’d want to make sure that they would have appropriate coverage in place because they could be adding to the liability for the construction that is happening and you want to make sure that the appropriate party is responsible for their actions or negligence and that type of thing.
You want a contractor with good insurance if you’re hiring somebody, but you, as the owner, you’d still need Builder’s Risk Insurance.
If somebody’s a contractor and they’re performing work, you want to make sure that there are appropriate protections in place for you as the owner. If something that they do that day cause results in a claim, you’d want to make sure that they have the appropriate insurance in place to not only respond to that claim but also protect you as the owner through various additional insured provisions and things of that nature. Ultimately, all don’t come back to you as the owner.
What about a property manager? What kind of insurance would you need if maybe they’re a third party, you hired them and their vendor, or if they’re your employees? Are there different insurances that you’re going to need if one is for an employee versus one for a third party?
In general, say they’re a third party, I would want to see that that property manager has liability policy in place. If they’re on-site at your properties and something they do causes negligence, you want to be sure that they’re appropriately insured. If they’re your employees, the next thing that you would want to consider is that there’s likely a requirement for workers comp coverage. Workers’ compensation would be important that if you as a property owner have employees, whether it’s a property manager, maintenance person, security, and that type of thing, you have the responsibility for that worker’s compensation coverage. As a property manager, you would probably also want to have Errors and Omissions Coverage. What that would do is protect you against claims saying that you’ve failed to live up to the services that you’ve promised to your clients. That would be something that you might want to consider as well.
Workers’ comp would be more if something happened to the employee. What if they were responsible for something to a tenant? What insurance could be used for that?
This person is your employee, correct?
Yes. Let’s say the employee does something that ends up hurting one of the tenants. Somehow they leave something there and the tenant trips and falls. Something happens and they’re responsible. What helps with that?
The General Liability Policy that you’ve placed as the property owner has different provisions and definitions for who’s considered insured under the policy. That employee, if it’s something that they did, their negligence caused harm to someone and they filed a liability claim. Your General Liability Policy would respond. It would not only protect you as the owner, but it would also protect the employee for that claim as well. That’s another reason why the General Liability Policies are important.If you’re hiring somebody, you want to make sure the contractor has good insurance. Click To Tweet
What about other types of commercial properties? You own retail, industrial, self-storage, or something else, are there different insurance policies that would be good for those types of investments?
The standard General Liability Property Policy is important across the board. If you owned that type of commercial property and you were not the operator of the business, that’s one thing, but if you owned it and you also own the business that was operating it, you’d want to be sure that you had coverage not only for the building but also for your business operations. Most commercial package policies are written in a way to be able to protect your ownership interest and not only the property itself, but also the business exposure. That’s not uncommon.
Depending on the tenant, you might have the need for an umbrella so higher limits on the liability side or you could potentially have environmental liability concerns. Say you’ve got a gas station or an auto shop that could have the potential for leaking gasoline, grease, or things like that, that could potentially damage the environment. Even if you’re not the person responsible for that so you’re not the business that performs those operations, as the landlord as the owner of the property, you could be brought into claims. Understanding who the tenant is and what their operations are could point to the need for different types of coverages and different exposures that you might have.
Can you explain the Umbrella Policy and what’s it for?
Most general liability policies that you purchase will have a standard limit that they include. For instance, you might have a $1 million limit and a $2 million aggregate limit for the course of that policy period. What the umbrella does is it provides higher limits for you in the event of a liability claim. Most people think, “I make $900,000 in revenue. I don’t have the exposure for something over a $1 million and a $1 million limit is sufficient.” That might not be true. Depending on what happens, what and who’s involved in the claim, there could be the potential need for higher umbrella limits. What that does is, it extends coverage for you. You have access to $2 million, $3 million, $5 million and upwards of that limit for that liability coverage.
Is the umbrella for the business or would that be personal?
You can do both. A lot of people like myself have a personal umbrella. My husband and I do. We own our home, both have vehicles and we have a motorhome. We have a personal umbrella that will extend over the liability for each of those policies. They’re all scheduled. That way, we’ve increased our protection as a commercial property owner or a business so you can have a commercial umbrella that would increase the limits as well. You can have it on either side, whether it’s a personal policy or commercial policy or property.
I have a personal umbrella as well but I didn’t realize that you could do the commercial umbrella. What are some of the biggest mistakes you see investors make with regards to insurance?
Some of the mistakes go down to not understanding what you have, how the policy and insurance works. Most people don’t like to think about insurance. It’s something you have to get not something that you want. A lot of times, it’s not understanding it. Having someone explain it to you can open you up to exposures that you didn’t know or understand that you had. To think of a few that I see probably most commonly, one would be not insuring to value. Either your liability limits are low. For instance, if you have either a residential property that has a high amount of units, you might have the need for a higher liability limit, or you’re a property owner of multiple properties that are all on one policy. You probably would want to have an umbrella policy. One loss doesn’t erode your limits for all the other properties that you own. There are either insufficient liability limits or on the property side, not carrying sufficient limits for your building. Understanding at the time of loss, that’s when the carrier determines the value of your building and the value of the loss. If you don’t insure to value, there could be potential ramifications for being able to collect the total amount of what you lost in that claim.
I want to ask you about having multiple properties on one policy and how that could be an issue. Would you recommend that people in each property have its policy or does it matter if they’re on one policy or not, it’s only about having enough coverage?
There are pros and cons to both. Having separate policies, each property is going to only affect its own policy. If you have a lot in that one, it’s not going to affect your limits at the other. That’s a benefit to that. On the opposite side, having your properties on one policy will help to ensure that you have consistent coverage across the board. A lot of times, what we see is if you have different policies with different carriers, there might be coverages that you get with one carrier and not the other. One carrier might have ancillary coverages for things like a backup of sewers and drains, while another carrier might have a lower or higher limit. Understanding the totality of your structured program. If you have different policies, you want to make sure that you understand what one policy does or doesn’t have. Whereas having everything on one policy, you’re going to have consistent coverage no matter which property you’re looking at.
There are stories that ended up with a horror story of experience because they didn’t have the insurance or insufficient insurance. Do you have an example of that?
I don’t have a horror story.
Hopefully, none of your clients, but have you heard of somebody else’s?
Some of the biggest things that you hear of is thinking back to all these catastrophes that we’ve had. Whether it’s the wildfires, the hurricanes, and that type of thing. If you don’t have flood coverage, a lot of people don’t understand that that’s not included in a Standard Property Policy. In those instances, it’s like having to deliver bad news at the time of loss. I haven’t had to do that for things like that, but that’s where understanding and having an advisor that will alert you to some of these exclusions, standards, and things like. It will help you understand. Do I want to buy a policy? If I don’t, that’s okay but understand that’s potential exposure that you’re going to choose, to either self-insure or accept that exposure for it. Having that dialogue is important.
Let me ask you a question about that because I know that Houston, for example, had horrible amounts of flooding. There were quite a few properties that flooded that weren’t in the floodplain and ended up being a lot more flooding than people expected. How do you do if you’re not in a floodplain? I guess it doesn’t matter. You’re probably still out of luck. What would you recommend to somebody about getting those types of catastrophic coverage policy?You want to have an umbrella policy so one loss doesn't erode your limits for the other properties you own. Click To Tweet
There are flood zones and different lenders will have requirements that if you have a property in a flood zone as a condition to having that mortgage with them or to get that loan that you have to have the Flood Policy. A lot of times that requirement, whether you want to purchase it or not, you want that loan, you’re going to get it and you’re protected. If you don’t have that requirement, you don’t live in a floodplain, you could still buy the policy. You still could purchase a Flood Policy for instance or Earthquake Coverage. If you don’t think you have that exposure, you might not purchase it. You have to weigh how the proximity of where you are understanding those flood zones and determining if you want to accept that exposure or the likelihood that it’s going to happen is pretty low.
Hopefully, if something does happen, it’s not a total loss. Hopefully, it’s a partial loss if you don’t have that. It’s hard. There’s no right or wrong formula to it but that’s where having that broker or advisor to talk through some of those exposures. My job is to help you understand the risks and help you understand what those exposures might be so you can make an informed decision and hopefully, everybody’s comfortable with the decision that’s made.
I realize that this is interesting. Time flows by. I had so many more questions for you. The most important question is, what’s the best way for people to reach and find out more about what you do? If they’re looking for insurance, how can they get in touch with you?
I have email on my phone or I’m in the office. Email is probably the best way to reach me. I’m more than happy to answer additional questions and that type of thing. My email address is [email protected], or you can look me up on LinkedIn. I do have a LinkedIn page as well.
I’m going to give a plug to Amber because we’ve worked with lots of different insurance brokers and she’s the best. She’s been awesome.
It’s been a pleasure. Thank you so much.
We have time for a quick trinity, which is a brag, gratitude and a desire. What’s one thing you’re celebrating now? What’s your brag?
I was asked to be on the board of directors for a local nonprofit. I’m super excited to be joining the board for Hands Together. They’re located in Santa Anna. They focus on literacy for preschool-aged children. I have two young boys. I totally understand early childhood education and the importance of that. I’m excited to be working with this organization. To have the pleasure to have been asked to be on their board of directors. I’m excited about it.
What’s one thing that you’re grateful for?
This one was hard for me to pick one because I feel so blessed in so many different areas. First and foremost, I’m thankful for my family and to be blessed with my two young kids, my boys, they’re crazy, but so much fun. I’m so blessed to be their mom. My husband is super supportive of me and my career. He’s going to watch the kids so I can go to an event. He’s an awesome dad. I’ve been blessed with the three of them.
Last but not least, what’s one thing you desire?
I know that this is a real estate investment focus show. We own our home. We’re lucky to have the investment in our own home, but someday we’d love to have investment properties. For the future, that would be one thing that we desire. It’s to be able to do that and dive more into the real estate investment world.
So shall your desire be or so much better than you can imagine.
When it comes, I will probably have a lot of questions for you. I know where to go.
Thank you again, Amber. That was awesome. You guys can get in touch with her at [email protected]. You can get in touch with me at the RealEstateInvestorGoddesses.com website or our Real Estate Investor Goddesses Facebook page. Those are probably the best places to reach me. On the website there and all sorts of goodies for you. I look forward to connecting to you there and come back for another Real Estate Investor Goddess episode. Bye.
- Amber Seggie
- Orange County United Way Emerging Leaders Council
- Hands Together
- [email protected]
- LinkedIn – Amber Seggie
- Real Estate Investor Goddesses – Facebook page
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