KGCI: Real Estate on Air - Understanding Fundamentals of Insurance

Episode Date: July 24, 2024

Well, hello, hello, hello. My name is Beth Riley, and I get the privilege to talk to Dan Marvin today, who is an insurance broker with North Star Resource Group. Welcome, Dan. Thank you very much, Beth. I'm glad to be here, and I greatly appreciate you, invite me on your podcast, and it's been a pleasure to get to know you. Well, it's definitely a relevant topic right now. We're going to talk about insurance, and there's a lot to unpack and to talk about. did see one of your talks and this is why I was really interested in learning more and having

on the show is because I did see one of your presentations and I was like, oh, that makes sense. So it was helpful to have somebody break it down, make it simple, and you were the guy. You knew what you were doing. Thank you. Yeah, I definitely agree with that. And that's why I've been doing these presentations to really kind of get back on track. And especially when people have seen these crazy market that we're in, it's really great to kind of reel back and look at what's been changing that. So I'm definitely happy that we were

able to connect over this. Yeah, thank you. So you had many different explanations. I'm not going to go off task because the way you did it in the presentation that I saw you, I'm like, okay, no, nope, he already knows what to do. I want to jump into all the meaty stuff, but I'll just ask questions along the way if you don't mind. But I'll learn, just talk a little bit about what our learning objectives are today and I'll try and I will make myself stay on task I promise no problem no I totally agree and it's hard to jump ahead and like you said you have those big issues and questions and that will definitely get to them and if we miss any of them we'll always make sure we get to them at the end as well really the inner kind of learning objectives I put together is just going over insurance

kind of going through a outlook of some people we don't really know how much they know or how experience they are with insurance so I really try to go from as easy as possible and kind of relate to what is changing now in our markets. So as we talked about, we're going to go over the market change overview, kind of go over the homeowner coverages, Ottawa umbrella, and what this information can do for you and also how to utilize this. And like I said, I've done this presentation for a lot of real estate agents and also just brokers in the area, too, just to get people kind of caught up to speed on this as well. So the first point we really go to, our next slide is kind of just what insurance is.

Do we lose you? There we go. What insurance is? And really the essence of, I found this quote, essence of risk management lies in maximizing the areas where you have some control over and while minimizing the areas where you don't have control over. And really, insurance is just a risk and taking a risk away from us as an individual. And that's where we go on.

We talk about the big four hours. I always call them the big four things that insurance is going to really protect us against in the sense of what we have to worry. So on the next slide, we'll see our big four that we talk about and what insurance really protects you against. And these are a big four that can take away a lot of our life-saving, financial legacies and things like that. That just is lawsuits, the catastrophic events, disability, and untimely death. And under those, I have policies that kind of correlate with those big four and the big four reasons and risks that we can't control. And that's where insurance comes into play. So perfect.

And like I said, those are all the different types of insurance that would correlate with both of those. And at North Star, we work on all those. And I specialize in the P&C, so our property and casually in those catastrophic events as well. So we keep moving through on this one. We really, a lot of things, I worked at State Farm for a year, too, and I was an agent there. And that's where a lot of people don't know about the different types of markets there are. And really one market that we're seeing a lot more is the E&S market. So normally we have our standard insurance, which has all of our American family, state farm, nationwide, things like that.

Then we have our E&S brokerage and E&S market. That is for new ventures. It's definitely a little more expensive, more underwriting that needs to go on. But they are great for helping new business ventures. One time we've seen them recently is with AXORN. At first, they're like, hey, I'm going to let people throw axes and drink beers. And people are like, well, I don't know if we can cover that. But that's where E&S can take on those new challenges, but also get you back to the standard

market later on. So, Dan, if we can go back just a sec on that. So you were talking in the last slide, there's different risks we can protect against. One would be a lawsuit, catastrophic events, disability, untimely death. Lawsuits, do you have auto insurance, homeowners, insurance, and umbrella policy. That's, everybody should have those, those insurances. Is that correct? Correct. And so one thing too about Minnesota is Minnesota is a state where they can garnish your wages for 20 years in the sense of a car accident or anything like that. And that's why really making sure you have the adequate coverage on those items, your car insurance, your auto insurance, your homeowners and things like that really is key. And not saying it's always going to happen, but it's just the risk that we want to protect against. Okay. An umbrella policy would then be over every. Everything. Correct.

Yep. And that's where people have this misconception. And sometimes people who don't know much about it because it is a weird term, but really, as we think of an umbrella, it covers over everything. Our umbrella policy will cover our personal auto and also our homeowners as well. But there has limits before that can be touched. And it's definitely good to have. I'll have a slide in there later as well. Like you said, they're good points.

And those are going to be in there, too, because a lot of people don't know too much about an umbrella policy. that might have heard it here and there, but it's so crucial to have a part of your risk management plan. Yeah, I think we got an umbrella policy when we put a trampoline in the backyard. No, yeah, that's a great one. Everyone has their own reasons too, but that is a great reason as well, because a lot of times our parents don't think about that as the kind of ensuring a risk you have when you do have kids over or parties or things like that as well. It's really not something fun to talk about, but until, you know, someone does actually get hurt.

And then in the great quote that my manager's told me is, your aunt's not going to sue you, it's going to be your insurance company that does. So even though they're best friends and, you know, they would never do so, it's going to be ultimately up to them to subjugate it or if they have to do that. So catastrophic events, so catastrophic events for Minnesota would be anything from hail to tornado? Yes, yeah, when hail, catastrophic. is it is in the point of you had a building, there's barely anything left. The worst of the worst happens of big crazy fire or something. And that's what I really try to train a lot of my clients on is we are really trying to protect against these big catastrophic events. And these little claims,

you know, they can be tough at times and we really help to get through that. But filing a lot of minuscule smaller claims can really impact your future insurability. And we've seen that a lot. in this tough market. And that's where I always talk about catastrophic. That is when nothing's left. We want to rebuild. So whatever it was. So definitely a big coverage. All right. So you only want to go for the big claims, not the little guys. You really do. And trying to coach my clients through that is really part of my job as well in the sense of just, you know, it can be done. We can always file a claim. But is it going to be best case for us and especially down the road as well?

And disability. What exactly is disability insurance? So we have a whole department on disability insurance. It really is, I've seen a really a lot in medical or higher end terms where it's like if I were disabled and not being able to get an income, how can I take care of myself? And especially being like a maybe the single breadwinner of a family, having that income is very crucial. And it's definitely a thing that we can assure and protect against. And those are policies as well that really help high-income earners to or low as well just to make sure that they are protected.

They can range in how much they cost. And it's a whole different crazy language out here. I'm talking sometimes in the D.I. Department. I'm like, what does that mean? And it's really good to have specialists in that. I try to stick to P&C. But it's definitely a great coverages to have. And there's a lot of professionals that can help you.

that as well. Okay. And then untimely death, life insurance. Life insurance, correct. Unities, things like that as well, to really protect that. So those, like I said, the big four and the risk in our life that we really try to prevent against. And that's what insurance basically is going to cover you on those really big, big four to protect against. All right. I just wanted to touch base on them because I think sometimes the people are underinsured. And I think the umbrella policy is super important just in case, right? You're very right and very inexpensive and great option as well. So it's just people don't know about it yet. So great to always try to talk about as much as I can to people who might not know. Now the standard market is really us going out. Let's say it's just

your average Joe that goes out into now it's on the, we're talking about markets and how you get insurance. The standard market is really what you go out to for hazard insurance. or whatever. Yeah, and honestly, that was the most common. Like a few years ago, a lot of the big property owners I've dealt with, we're just, you know, we've got American family policy or progressive state farm or ones that you'll recognize. The E&S market, you're really not going to recognize a lot of these brokers. A lot of them are some acronyms or bigger parts of bigger companies, but they're built to be able to take on tougher risk. And they also help place companies together. It's like an apartment. One company will take a portion of it if you have a

total insured value of 10 million. One company might do five, one do four, then one do one on top, just to build a policy to protect them and not have so much stress on one company. And as Minnesota have seen the last few years and other like California, Florida, tougher states right in E&S markets have been really helpful to help clients and new business ventures see coverage. And like I said, new business ventures are really pivotal to E&S, the market because they will take on risk that other carriers won't. And that's where we'll learn that experience for new ventures really plays a big part. For example, I had a client that want to start a restaurant and that they had a chef that started multiple restaurants. we were able to get a quote from a standard carrier who was more willing to take that risk

than maybe someone just starting a new venture and not having that expertise, and they might have to be on the E&S market for three or four years before they can get a quote on a standard market. So there is use for it, but it is a little bit more expensive and more underwriting. It's putting out the risk. It is. It really is. And it's allowing us to take on new risk.

Like I said, the axe drawing was a big thing. Oh, yeah. Now a lot of carriers are like, oh, yeah, I'll write that. That sounds perfect. It's like, well, a few years ago, you thought it was horrible. And now it's more doable now. And so it really does help kind of start out for different industries as well. No, you're a broker and not, I forgot the term, is it called a captive agent?

Is that it? Agent. Yep, and that's a whole different. But I try to break down with agent versus broker because a lot of people will have a confusion. and I have my real estate license and broker means something totally different in the real estate world. And coming from me, I'm like, wait, what? Broker doesn't mean that anymore. And so, yeah, broker is someone I'm going to shop on my client's behalf.

I have a client I can shop out of other carriers I'm appointed with, which usually are the big ones like Travelers, Safeco, Liberty Mutual and things like that. And an agent is going to be someone who maybe just works at Travelers. Like I am an agent just for travelers. I just sell travelers insurance. Or for state farm is very popular where they can just sell state farm policies and can't help you with other policies. So having- We would go to that would shop for us.

Yeah, having a shop, I would be able to shop for you in multiple markets as well. Agents will be just limited to theirs. They can always send you a referral or request. But in this tougher market, it's always good to have an agent and a broker. kind of working together to find some options for you because some agents aren't able to write policies with or maybe their company doesn't take that risk. So it's tough as an agent. We're like, okay, goodbye. Good luck with someone else. But it's definitely nice to be able to shop and have multiple options in the broker space. You explained some things in the last meeting. I hope I'm not jumping the gun here at all.

But what was interesting is a lot of people had blamed a lot of rising insurance to global warming. Now, I'm not saying it's not that. It's just that you had some other explanations, too, of why there are raising rates or rising prices in the insurance market. Yeah, yeah. And really, when we, I remember us talked about that because it kind of came to me a while ago because I've been dealing with a lot of apartment complexes. Right now, that has been tough to write, I tell you. And it's a lot of rejection going through all these other carriers, but I'll see what they used to have. And you can just tell that it was a very competitive market probably five or six years ago where every company was like, hey, I'll give you a full replacement cost, very low deductibles, $5,000 deductibles, $15,000 for the year.

And that one also got $1.6 million worth of roofing and siding this year and paid their $5,000. thousand dollars so oh look at that oh i know and we look at that even there are 10 000 a year premium they were charging for 10 years before is not even going to put a dent into that so i think it's really a lot of just competitiveness where we kind of got caught where now everyone's getting new roofs we're having these huge claims and a lot of these shirts companies weren't ready for that kind of wake up and especially in minnesota with a record win and hail last two years first year and the year right after. It's really been a unique time in Minnesota. And usually it's not as hard to place stuff around here, but we've been finding the challenge in the commercial sphere and also the

residential as well. And that's where I added things like carriers pulling out of the markets or really tightening their restrictions and standards, which has been making it very hard to place properties, especially like we talked about, that roof wouldn't shake shingles. that's going to be, especially it's like 20 years old. So it's a little bit tougher. So it's definitely becoming a factor that people are paying more attention to is that roof age and roof tight in buying residential. The shake shingles that we just recently had, it was a 30-year-old roof.

It had the shake shingles and they would not insurance. They would not. And that's what's still tough. Yeah, what we had to do was we could buy the house. house, but we had to replace it in three months. Yikes. And especially that bill after just buying a house, that's, oh, my goodness. That was all in the negotiations between the seller and us. Oh, yeah, that's tough.

I don't know. It didn't look like there was hail damage, but I don't know if it's as easy to find hail damage on a shake shingle as there is. Right. So. I bet, yeah, that'd be very tough. A lot of different, I think we're playing with a lot of different issues. Mm-hmm. That's what's tough, too, is it's really, people are becoming more aware because you were seeing in the residential market as well. And, like, for me, I felt like I was on an island alone just talking about how tough insurance was a few months ago.

Now everyone's like, okay, now we're getting our rejections or, you know, that circumstance is very tough. So what are some of the different homeowner coverages? Awesome. Well, yeah, and that's the thing, too, is kind of going over. just the homeowner coverages. We have our HO3, H.O4, H.O6. The most common, I love doing this presentation just for this part

of it, is because all these three have one really important thing that doesn't have to do with your house. And that's what my favorite thing, it covers you all around the world, which is our good old general liability. And I joke about it, Mr. 305, Mr. Worldwide, because

that general liability will cover you no matter where you go. There we go. Perfect. I love doing that part. But and people don't think about that with their renters policy. Renters policies are very inexpensive usually, but I mean, I work to property management, so I hear it all the time from renters like, I don't need that, blah, blah, blah. But it's really just protecting your stuff. And really the general liability, I golf a lot.

So it's perfect for me. I'm covered. If I hit one out of balance and hits them, I'm covered. So that's an example of how that general liability would cover you in that situation, but it goes all over the world with you as well. And people forget that part about it. Yeah, it's interesting. You said it covers you worldwide. Your friend won't sue you, but their insurance company will.

Exactly. And that's where really having these coverages. It doesn't matter where you have it. If it's in your home, your renters policy or your townhouse policy, you've got to have it. And especially on those three, though, the HO6 policy, the townhome is one that I've really been talking to a lot of agents about for real estate just because of the changes we've seen in the market. And here we go. Yep. The loss assessment, I tell every real estate agents I'm talking to is we've got to burn that in their head because that, so loss assessment, that is the part in your policy that will cover you for a win, hail claim because for townhomes and HOAs it works differently. They'll have a master policy and they'll have the whole property covered. And for example, it's usually like a total insured

value. Let's just do $10 million. And then they're going to have a wind and hail percent deductible. So they'll have like a five percent, three to five percent, wind and hail claim deductible. And they'll pass that on to all the homeowners. And that's why you're, loss assessment needs to be to that amount because then you'll just pay your deductible of whatever your H.O6 deductible is and then the insurance company will pay the rest. And that can be from what I've seen 50, 60, 70,000. I had one yesterday. We had to do for $100,000 for loss assessment. So that means their condo associations are going to ask them for $100,000. I couldn't believe it. And they were at $10,000 before. And as you know, too, as in real estate, like, if you don't pay those assessments to the HOA, you can lose your home from that. Yeah. And that is what's so scary to have this huge amount of money that you're going to have to come up with. But another thing, too, is the loss assessment needs to be looked at every year.

And that's why if you have a townhouse, work with your agent or your broker, whoever you might be working with, because your HOA's policy is going to change throughout the year, and you've got to make sure that your policy coincides with that. And that even goes to what kind of policy, is it the walls in? Is it just the studs? If everything burned down, what is your HOA going to replace for you? And that's what people don't think of it either, because I've had ones where your property, we're going to get you at 10,000,

because everything's going to be put back to place exactly, and even with tenant embedderments. So you really got to make sure. sure you have the master policy to write your HO6 policy. And if anyone gives you one without getting that info, it's not right. Well, I think townhomes are under a lot of scrutiny right now, just their finances, everything need to really be broken down and evaluated. And you really need a talented person on the finance side and also understanding the coverages. And I agree. I so agree. And I've been talked or approached by a few people who are like, hey, I'm part of

my HOA, we have no idea what's going on. Can we get you to come talk? Because it's true, they don't. And it's just collective people who all live there who are voted on the board, but it's like, we really got to make sure. And if we change our policy, we've got to let make sure all of our tenants know what the new policy is. And like I said at our meeting at State Farm, when I, when I worked there, I could get your name and address and click five times. And I could get you a policy. But to do it right, I really got to reach out to the HOA, have them send over that form and even working with the real estate agents to be like, hey, can we find this form or who's the association for this property? It really is. And the premiums aren't that high. These policies

are probably be $400 to $500 a year, but to make sure they're right, that can be huge. Yeah, because of some, you never, you don't know what's wrong until something blows up. Oh, I know. And those are just nightmares. I've dealt with one and it wasn't through our association. and he had a homeowner's policy on his townhouse. I was like, what? Like I was looking over it a million times. It was like, you have a homeowner's policy. You have an HO3, and you live in a townhouse.

So he had no loss assessment there. And he was scrambled. He had to get $8,000. And I felt horrible. I was like, I don't know who wrote this for you, but it really is down to the fine print on those policies. The biggest thing you had to worry about is that loss assessment. And you got to make sure.

and how their HOA policy structures well. Now, auto coverage is another area. Now, this is something you're just basically educating us. You don't do any auto coverage to. We can write some. I just stick to my commercial, but I'm always happy to present it because I have seen so many people with these three numbers get them every single way, but right.

And it's been funny. I was talking to my mom recently, and she thought she knew what those, And I was like, that is, that's adorable, but that is not what is it actually covers. Because, so the first one I put is 30, 60, 10. And that is the state minimum in Minnesota. That's what you at least need in coverage. And the numbers go, the first number is always bodily injury to one person.

So it's 30,000 for one person you injured, stacking up to 60,000. And the last number is 10,000, so that's your property damage. show what your insurance company would actually pay if you hit someone's car. And that standard's been set in 1974 because it's tough to find a car that's under 10 grand if you're going to hit someone. So make sure you hit the right car if you have that. But that's why we're always going to suggest I carry personally the $250,500, $100,000. And they're really high limits.

But the reason why I carry those, and a lot of people are going to have to, is because you'll need those coverage of $25500, $150,100 to get an umbrella policy. And we'll go over that later in the next few slides here, but that is the coverage on top. So if I hurt someone, one person, $280,000, and I can come up with the $30,000, that's where the umbrella comes in on top. No, deductible comfort on top of what damage I might have caused. and yeah the thing I put it on the bottom is full coverage people always say they have full coverage but they don't really know what they mean by that like in the sense of do you have what do you mean do you have stayed minimum but you have full coverage you don't really have it or you just have liability when you're covered if you hurt anyone and so that's really just I know no one likes to pay for their auto insurance to talk about it but really having those right limits is is huge in the sense of if you get in the car because it really can, like I said, the big four can be really big.

And especially in Minnesota where they can garnish your wages for 40 or 20 years. It is really for our financial advising clients, we do not allow it to be a statement. We've got to make sure because that's the biggest that can take your wealth, not having those limits correct. Good. The umbrella policy, you said that that plays a role in actually getting an, no, liability. Okay, I'm missing your full liability was the last thing. $250, $500, $100, $100, and then plus a liability policy. Is that correct?

So those limits for a lot of my carriers that we'll write with is they'll require, I've seen some where it's $100, $100, $100. So they'll require you to have those auto limits to be eligible for an umbrella. So that's, yep, and that's just the, and weirdly too, if you have a boat, they'll ask for those coverages. So they'll make sure that you're properly insured. and not having the umbrella cover you entirely. The umbrella should be the, uh-oh, I really screwed up.

This needs to save me catastrophic. And that's what I need people to understand too. It's like, that's what's tough for insurance. Like, I hope you never use this policy. I really hope you don't. But I do, if you're ever in that situation, I want to make sure that you are comfortable and you will not, you know, be taking advantage up on that.

And that's where to where it's very inexpensive. once you have those limits and you get a million dollars for, you know, under 20 bucks a month and depending on carriers. So it's really not too much. You just got to have those right coverages to get you up to that limit. Why is it important to leverage your resources for relevancy? I don't know what that means. So I was using that for a lot of my insurance client or real estate agents I talked to

is just using your knowledge of, you know, basic knowledge of insurance to kind of set yourself apart from other agents saying like, hey, you know, in this way you have the roof where that could be an issue or having a broker in your pocket to be like, hey, we can actually shop these out and having access or knowledge of the insurance to kind of best help your clients. I think that's huge, especially for commercial property. It's been day and night change from a few years ago, and I've been working with some of these clients where they're seeing increases of like 90 to 100 percent and worse coverage is almost. And it's been a huge talking point for commercial real estate owners, just trying to find anywhere to find insurance and to get over that challenge. So that's really what I wanted to leave with my teachings when I did with real estate agents is you really got to.

got to know a little bit of everyone. I'm sure you know everyone too, Beth. You know everyone in every field almost to be a very good agent like yourself. And that's why I said, use me as a resource. You know, definitely if you have a question, I always feel free to give me an email. I'm more than happy to help you out. And it's definitely good to know some people in insurance nowadays.

Well, the things that I think I will definitely look up is at the $250, $500, $100, then if I can get like all of a sudden I have no idea I've none I mean I always have insurance and it just renews and that's how it rolls but I really have no idea if I have enough insurance in that arena the other thing the just the disbursement of risk and that it goes into that secondary market I thought that that was very interesting oh yeah and a lot of people never heard about the excess and surplus market. And I was really new to it as well before I started being in the broker space. I've never really heard of such companies, but they, that I was able to do my research and find out that they are kind of the last resort option or, like I said, temporary

option for maybe with bad claim history or things that other standard markets wouldn't like. And I had to help my clients with that, too. It's like, it's not the end of the world. It's going to be a but higher premium and not the best coverage now, but that's all we can get right now. That's right. Use these loss mitigations and we're going to have good clean loss runs. And then next year we can find something for a little bit of cheaper option as well. And wait for the market to kind of rebound and some of these carriers on the standard market open up and relax guidelines.

Right. I also like the fact that you kind of explained why beyond that we have had record years with record hail i get all that but also the fact that we've been really almost an auction effect of trying to find the lowest priced insurance without truly i think we've looked at insurance as all insurance is the same yep it's been 100% and that's why we thought it was just a commodity that you just go out and you you get insurance and you show your insurance card and you know you get out of jail for free i don't know that seemed to be the direction, or at least that's how I had treated it for a long time. Everyone has.

And I totally agree with you. And that's where a lot of people were just selling on price and the best of the best. And they were so competitive until the point we're like, wait, what are we doing? We're going to charge it $5,000 for a whole new roof and siding on everything. Like, okay. Like, what? And that's where it's just crazy. Yeah.

And that's where it's tough because, you know, everyone else will say, you know, oh, it's because of the roof or wind and hail and stuff. But I think there's also blame to play on, you know, selling on price. And that's where I kind of like what I do now is I'm really not selling on price. I'm really just making sure you're protecting and have the things you need because price is always going to go up and down. But when you need this policy, I want to make sure it's doing what we planned on it to do. and if I have to cut your or have to lower your protection just for the price to when your business, it's not a business that I want to do. And that's definitely what we have to do.

I agree. Well, below we have, as you can see right below, it's your email address. So if people are interested in learning more or having to present, I think you'd be great for HOAs. That would be a thing. It would be nice to have you go in and start really talking to people because they need help. And I'm not saying it's because people are incompetent or anything else. It's just that we're starting.

I'm working with more and more older HOAs or older condo units, townhomes. They need bigger and bigger projects to be covered. And it would be important that this would be a good time to reevaluate, not only their funds and how much money they're putting into everything, but also to look at their insurance, and if they're covered on the right areas. I totally agree. And that's why I was so happy when you invited me on your podcast here. I really do like just kind of educating people a little bit more about this changing market.

Because like you said, if you don't have a huge increase, I don't know why people aren't looked at their insurance. And it's kind of swept under the rug. But I'm more than happy to try to make it fun and try to get a little educational out of it at least. Well, thank you so much, Dan. I appreciate your time. And this was very informative. at different points I'll have to go back through the deck and figure it out again, but I did go over. I've seen your presentation. I looked at the deck a couple times and I'm like, there's really

good information here. And I think that you'd be very instrumental in, well, not only have you helped us, help me, but also instrumental in helping other people better understand the new climate for insurance. Thank you so much. I greatly appreciate that. And yeah, I want to continue to try to help and educate people as much as they can so they can make the right decision. And like you said, it doesn't need to be so confusing and such a duance to talk about insurance. I'm more than happy to do it and see what we can do for everyone we can. So I always appreciate your time and thank you greatly for this opportunity. Great. Thank you.

And if you're looking for any real estate needs that you'd like to have, you'd like to buy, sell, or learn more about real estate, the Flamingo group would be glad to help you. So thanks for your time again. and have a flocking good day.