Insurance advice

We carry the standard liability insurance for our park, and we insure the few homes that the park owns. We also have started requiring that all new tenants insure their homes. However, I don’t have any good way of enforcing that tenants have insurance, and I’m fairly sure some of the older/original tenants don’t bother to carry it.

So here’s what concerns me: If there’s a tornado, major storm, or fire that damages multiple homes, then I could see myself left holding the bag. Obviously, for those with no insurance I’m out the lot rent and I’m faced with the responsibility of filling those lots. Even for those with insurance, who’s to say they won’t just take the money and run, again leaving me with the empty lot?

A great opportunity to bring in new homes, you say? My margins and reserves are so low in my 22-pad park that I could not cover multiple total losses. Yes, I could endure having a few lots down, but it would take a long, long time to get multiple lots filled.

I would really like some sort of insurance to cover a multiple catastrophic losses. In talking with insurance providers, the problem is that they don’t want to cover homes that I don’t own.

What is the best way to cover this kind of situation, no matter how unlikely it might be to occur?

First of all, talk to Kurt Kelley at Mobile Insurance – he is the master of properly insuring against such things. We had a park hit by a tornado, and the insurance was so well written that it virtually paid the mortgage off. You can insure many things in the park that you would not think of, such as the utility lines, etc. The average insurance agent has no idea how to do this.

Secondly, the reality is that some people are always going to take the money and run – just like they do in single family, but it’s not the norm and not a big percentage of your customer base. Most have jobs and need shelter and can’t just jump in the pickup with the whole family and head to Margaritaville. There is a huge housing shortage after a tornado (just ask people in Joplin) and the demand for your lots will be extreme, with the existing tenants thankful they have a lot to move their new home back onto. In our park, the Red Cross and FEMA gave each tenant a check for roughly $30,000, whether they had insurance or not on their mobile home. That’s the beauty of a tornado (which has finite impact) and a hurricane (just look at Sandy with 30,000 without homes – nobody can write checks for that).

Finally, you have to get a realistic handle on tornado risk. Go to one of the websites that shows the historic occurence of them and the impact. You’ll see that the #1 spot is Tulsa/Oklahoma City and the #2 spot is Ft. Worth. After that, its pretty much a southeast thing, with not as much midwest activity as people think. See where your park is on one of those maps, and get a handle on the actual likelihood of a tornado. A lot of tornado information is urban legend. Whole parts of the U.S. have an incredibly small chance of a tornado of any consequence.

There are insurance riders you can get for cleanup and loss of income. Kurt Kelley, a mod on the forum insures most of my parks, and I know the cleanup and loss of income riders have saved Dave Reynolds in a disaster or two.

As a note- if your using a professional- like for insurance- be darn sure they know more about how to best support you than you do. If your always the smartest guy in the room, you will run into problems down the road. The smartest people in the world, stand on the shoulders of intellectual giants. Also seek advise from your detractors- truth comes in many forms, and if you can fully understand and embrace those who have views that might appose your own, you will be more aware and a much better leader.

Thanks, I’ll look up Kurt. I am in the southeast, and there is usually one or two tornadoes each season in my area. Often the damage is light, but every few years you get one that cuts a path a few miles long. That’s what insurance is for - covering things that can happen, no matter how unlikely.

I never thought about the loss you’d incur by loosing homes that ARE NOT YOURS. I’m calling my agent on Monday. I have business interruption insurance on other deals I’m in. I’ll report back yo the group later

When preparing for disasters, it’s critical to have the following insurance coverages/plans in place:

  1. Loss of Business Income with Extra Expense - the “extra expense” coverage is available to pay for tenant owned home debris remaining on the home site that prevents the home site from being re-leased to this or a new tenant. That said, unless the insurance company is a park specialty company, they’ll almost always decline to pay this expense at first. You’ll need an experienced agent to explain why indeed this loss is covered. It’s also a good idea to actually carry a higher “loss of income” limit than your actual gross annual income because the amount paid as “extra expense” in a park can and has exceeded the amount paid for loss of income;

  2. Extended Loss of Business Income Coverage (or “extended indemnity”) - Regular loss of business income coverage only lasts until the park is up and operational again, plus 30 days (and never longer than a year in total). Thus, if a major storm destroyed half the homes in your park, it will take some time to lease these sites after the park has reopened. This coverage will pay you enough so that you have your total pre-storm income for a period of 6 to 12 months; and

  3. Debris Removal Coverage - you can purchase stand alone coverage to remove tenant owned home debris. This coverage is easier to manage and trigger than the “extra expense” coverage noted above, and it extends to remove home debris that isn’t obstructing home sites or roads; and

  4. Requiring Tenants to Carry their own Mobile Home Owners Insurance - this is a good practice, but requires follow up and management involvement. Your lease should require that tenants carry their own home owners insurance. If they are insured when the storm hits, you’re much more likely to have them stay and replace the home after the storm. Frank Rolfe and I have created a “No Home Left Behind” plan for anyone that would like to copy it.

And finally, to prepare for a major loss, you’ll want to make sure that your utility infrastructure is adequately insured. Most policies carry zero coverage to pay for damage to your utility systems.

Insurance is there to reimburse the damages regardless what they are. Depending on the contract. Many people tend to misuse their insurances and because of those kinds of people others tend to suffer.

Insurance is to protect us from unexpected loss but some people misuse this and making money. Should consider about the market value of the property when you select the policy value if u cover for under value they won’t pay the exact amount for the loss.

Insurance can be complicated, but those are great questions to ask your insurance agent. Does insurance cover ______(wind, hail, fire, vandalism…) damage to my ____(fence, power pedastals, office building, sign…) ? It’s good to know what’s covered. It’s really good to know what isn’t. Insurance is a contract with specific requirements based on what happens. It’s good to have the promises you need before the loss happens.

The best insurance advice in the mobile home park industry is just to use Kurt Kelley. He has saved us so much money it’s insane, both in potential losses as well as lower premiums. Kurt is our one-stop source for all insurance for our 7,500+ lots.