My Landlord Insurance Blog

Interesting article presented to us about lead paint.

Thursday, June 10th, 2010 | Landlord Insurance | 10 Comments

New Lead Safe Practices Rule
Effective April 22, 2010, federal law requires that contractors performing renovation, repair and painting projects that disturb more than six square feet of paint in homes, child care facilities, and schools built before 1978 must be certified and trained to follow specific work practices to prevent lead contamination. Lead safe practices include minimizing dust, containing the work area, and conducting a thorough cleanup to reduce the potential exposure associated with disturbing lead-based paint.
The new law is expected to limit the risks of lead poisoning that might result from renovations made to older buildings. Renovation is broadly defined as “any activity that disturbs painted surfaces.” It includes most repair, remodeling, and maintenance activities, including window replacement, weatherization, and demolition. Generally, minor repair and maintenance activities (less than 6 square feet per interior room or 20 square feet per exterior project) are exempt from the work practices requirements. However, this exemption does not apply to jobs involving window replacement or demolition, or that involve the use of any prohibited practices.
The rule covers any individual or firm that is paid to perform work that disturbs known or presumed lead-based paint in housing and child-occupied facilities built before 1978. This includes but is not limited to general contractors; specialty trade contractors including painters, plumbers, carpenters, and electricians; home renovation companies; window replacement contractors; maintenance workers; and to residential rental property owners and managers who perform repairs and renovations themselves.
The rule applies only to renovations performed for compensation. Accordingly, if a homeowner performs renovation, repair or painting work on his own home, the rules do not apply. However lead safe work practices should still be followed to protect home occupants and the value of the property.
There is no question that the new rule applies to renovation activities performed by landlords or employees of landlords. Landlords receive rental payments and maintenance personnel in rental property or child-occupied facilities receive wages or salaries derived from rent payments. The receipt of rent payments or salaries derived from rent payments is considered compensation under the RRP rule. Therefore, renovation and repair activities performed by landlords or employees of landlords are covered by the rule.
Those businesses and individuals affected by the rule are required to:
Apply to EPA to be approved as a Certified Renovation Firm and receive the necessary training and certification from an EPA-accredited training provider for Lead Safe Work Practices.
Assign a Certified Renovator to be present at each project and ensure that lead safe work practices are used throughout the project.
Provide consumers or tenants with the EPA pamphlet “Renovate Right” prior to the start of each project and maintain records documenting that the required information has been provided at each project subject to the rule.
Those seeking to become certified and trained can find more information on the process and a list of accredited trainers at: http://www.epa.gov/lead/pubs/renovation.htm#contractors.
Hundreds of thousands of businesses including contractors, painters, and even neighborhood handymen are affected by the new rules on lead-based paint safety. Failure to comply can be costly, with fines up to $37,500 per violation per day. In addition those who fail to meet the new certification and training standards could potentially be subject to lawsuits from individuals whose health was endangered by the violations.
To date, EPA has certified 204 training providers who have conducted more than 6,900 courses, training an estimated 160,000 people in the construction and remodeling industries to use lead-safe work practices. EPA estimates that more than 200,000 contractors will apply for the new certification.
In addition to the rule becoming effective, the EPA has issued these additional actions:
A notice of proposed rulemaking to require dust-wipe testing after most renovations and provide the results of the testing to the owners and occupants of the building. For some of these renovations, the proposal would require that lead dust levels after the renovation be below the regulatory hazard standards. EPA will take comment on the proposal for 60 days. The agency expects to finalize the rule by July 2011.
An advance notice of proposed rulemaking to announce EPA’s intention to apply lead-safe work practices to renovations on public and commercial buildings. The advance notice also announces EPA’s investigation into lead-based paint hazards that may be created by renovations on the interior of these public and commercial buildings. If EPA determines that lead-based paint hazards are created by interior renovations, EPA will propose regulations to address the hazards.
Additional Information
For more information regarding the new rules visit www.epa.gov/lead or call the National Lead Information Center at 1-800-424-LEAD (1-800-424-5323).

Article presented by rhol.com,  Rental Housing On line.

Tags: arizona, georgia, homeowners insurance, insurance, Landlord Insurance, michigan, ohio, out of country landlord, out of state landlord, texas, Vacant Home Insurance, vacant insurance, vacant property insurance

Should I insure my investment property for replacement cost or market value?

Wednesday, June 2nd, 2010 | Landlord Insurance | 21 Comments

We write a lot of insurance for homeowners and investors. Some live in the same state that they own the property, but more and more owners are coming from out of state and even more from out of the country. Because many states and countries have different standards when it comes to how to insure a home, I thought we could take a moment and talk about a common question we are asked when quoting insurance for our customers.

Many traditional homeowner insurance policies are written for replacement cost. Replacement cost insurance will insure a home for the expected cost to rebuild a home from the ground (or sub-ground if there is a basement) to the peak of the home. Replacement cost values usually run higher than you might expect because insurance companies try to estimate what the  would be to rebuild a home at a future time. Costs can vary from day to day because of the cost of goods, labor, supply and demand. When hurricane Katrina destroyed much of the southeast, labor and building material costs went up because of increased demand to build homes and the reduced supply because of business that were destroyed. A home in Michigan would have to pay more even though it wasn’t directly effected by the storm because  the cost to rebuild a home during this time would be higher due to the lack of materials and labor.

Market Value insurance for landlords and property owners have become a much more common in recent years. Market Value policies will insure the home for its selling value. That is a hard number to gauge today, but it can be done or at least estimated. The reason market value policies are becoming more common recently is for two reasons. The first is the moral hazard of insuring a property for more than it can be sold for is risky for the insurance company. Lets say you have a home that is worth $120,000 on the market but the replacement cost is $240,000 to rebuild the home. A homeowner or landlord would benefit from the house being completely destroyed because they could cash out the insurance for $240,000 on a house they may not be able to sell for $120,000. The insurance company does not want to start owning vacant land at $240,000 a piece. The second reason market value is more popular is because most homeowners and landlords would rather cash out on a home that is a total loss than wait for the contractor to rebuild the home. Homes can take a year or more to rebuild and that can be inconvenient for anyone. With a market value policy, the property owner can cash out and buy another home just like it for the same amount their home was worth or possibly even less in 30 days or less. This is a much more convenient and cost effective option for the insurance company and the insured.

One important issue to be considered on a market value or replacement cost insurance policy is how a claim is paid for a partial loss. If a home has a fire in the kitchen and the cost to replace the damage would be $20,000, each type of policies would pay differently. A replacement cost policy will replace the kitchen to a like kitchen with new materials. So you wouldhave a new kitchen to replace the old one. A market value policy will pay on an actual cash value basis. Actual cash value is best understood by thinking of  a car. A new Ford Mustang may be $30,000.  A five year old Mustang may be $12,000. A replacment cost policy would give the owner a brand new Mustang even if it was five years old while an actual cash value policy would only pay $12,000 because that is what it would be worth after depreciation. That means if the owner had an actual cash value policy and wanted to buy a new Mustang they would have to pay the additional $18,000 out of pocket to purchase the vehicle. The same would apply with the kitchen. The insurance company might pay, lets say $10,000, and the owner would have to pay the other 50% out of pocket. That could be a substantial out of pocket cost.

Some market value policies offer a rider which can be called different things but for simplicities sake lets call it a replacement cost rider. A replacement cost rider would give the homeowner or landlord a market value payout in the event of a total loss but would pay for a complete replacement in the event of a partial loss. This is a great option when looking to save money on insurance but still protecting yourself from a catastrophic expense.

Tags: actual cash value insurance, homeowners insurance, insurance, Landlord Insurance, market value insurance, out of country landlord, out of state landlord, replacement cost insurance