Ask An Advisor - Insurance Edition

Royal Legal Solutions Insurance Manager Aaron Porter, a seasoned expert, hosted the highly informative Ask An Advisor-themed group mentoring session

His presence added immense value as he enthusiastically engaged in a dynamic Q&A session, providing invaluable insights and expertise on various insurance topics.

If Fire Or Flood Destroys My House, Does The Insurance Company Pay The Homeowner And The Bank?

When a fire or flood destroys a house, the way the insurance company pays out depends on the specific terms of the homeowner's insurance policy:

How Do I File An Insurance On Behalf Of A Deceased Person?

Filing a property claim on behalf of a deceased person is a procedure that requires specific steps. Here's a general guideline:

  1. Appointment as Administrator: If the deceased didn't leave a will, you'd most likely need to be appointed as the administrator of their estate to handle their affairs, including filing insurance claims.
  2. Obtain the Death Certificate: You will need a copy of the death certificate, which verifies the person's death and your authorization to act on their behalf.
  3. Identify the Insurance Policy: Locate the insurance policy held by the deceased individual. It could be a homeowner's insurance policy or another type of property insurance.
  4. Contact the Insurance Company: Inform the insurance company about the death immediately. Provide them with a copy of the death certificate and other necessary documents.
  5. File the Claim: Follow the insurance company's process for filing a claim, which usually involves completing a claim form and providing any required documentation.
  6. Handle the Payout: Once the claim is approved, the payout may go directly to the estate to cover any debts. 

The Nuances Of Flood Coverage

Most standard homeowner policies do not cover flood damage. A homeowner must usually purchase separate flood insurance to cover flood-related damages if they live in a flood-prone area.

The National Flood Insurance Program (NFIP) offers insurance to any homeowner, regardless of flood risk. 

It's worth considering purchasing flood insurance if you live in a flood plain, near a river, or on the coast.

What Happens If My Homeowner Insurance Lapses?

If your insurance lapses, you're uninsured for that period:

A lapse in coverage can happen due to the following:

Many insurers typically have a grace period, usually up to 30 days, from the date of the lapse due to a missed payment. If your insurance lapses, you'll lose liability coverage. You'd be financially responsible for their medical bills if anyone gets injured on your property.

Will I Be Penalized If I Resume Insurance Later?

If you paid your house off and you decide to discontinue your home insurance, there won't be any legal penalties, but it's risky.

Key Takeaways

How Real Estate Investors Utilize Whole Life Insurance

Whole Life Insurance policies are permanent solutions that offer a wide range of benefits and perks. They are financial tools that help solve needs like:

The cash value account is an investment vehicle within the policy where a portion of premiums are invested and accrues interest over time. The policyholder can access this money while still alive by taking out loans against the policy or cashing out the policy entirely if needed. Before doing anything with the cash value in your life insurance policy, consult your trusted life insurance professional and CPA to learn the consequences of cashing out your policy.

What Is A Whole Life Insurance Policy?

Whole Life Insurance is a type of permanent life insurance that is considered the safest place to put your money due to the guarantees set out in the contracts. These policies have a leveraged death benefit that accrues a cash value that you can utilize for outside investments while your money is still participating in the growth inside of the life insurance policy.   

Advantages Of Whole Life Insurance Policies

The main advantage of Whole Life insurance in your financial planning is SAFETY. Life insurance is a contract that comes with guarantees. The insurance company guarantees certain returns, benefits, and protections as long as the premiums are paid. Those benefits are on a case-by-case basis, and life insurance is about solving each client's specific issues, problems, or desires.  

First, determine the death benefit amount. How much insurance are we buying in year one or over the course of the client's lifetime? This value is the determining factor for how much money is put into the policy. The death benefit also dictates the majority of the cost basis for the plan and controls how much money is distributed when the client dies.

Second, life insurance can be an investment vehicle and financial planning aide.   

There are disadvantages to consider with whole life insurance policies, such as urrender fees and tax implications for early cash-out.

How To Use The Cash Value In Your Policy

You have a few options to use the cash vaule in your policy. Each option has pros and cons outlined below.

Working with a knowledgeable, trusted, licensed, and educated insurance agent is the best way to get the outcome you desire.

Tax Implications Of Whole Life Insurance Policies

Whole life insurance policies have several tax implications to be aware of: 

Real Estate Investors And Whole Life Insurance Policies

One huge advantage of using the cash value component of a whole life insurance policy for real estate investors is that it can act as a source of financing:

This loan can be an attractive option for investors who need help securing financing through traditional channels, such as banks or mortgage lenders. Also, the policy loan is not considered income, so it does not incur taxes.  

Policy loans are collateralized against life insurance. They do not count towards your DTI, so they don’t affect your ability to qualify for loans. In fact, life insurance can help you qualify for more loans as life insurance is in your asset column and makes you more able to pay for your debts.  

Additional Considerations

Comparing the advantages and disadvantages of using the cash value component of a whole life insurance policy versus other investment vehicles is crucial for real estate investors: 

These investment vehicles do not offer the guaranteed death benefit that whole life insurance policies provide.

Key Takeaways

A whole life insurance policy may be worth considering if you want to save your money safely, let it grow, utilize it while it grows, and pass it on in ways you would not otherwise be able to. Whole Life insurance provides a safe, guaranteed place for your money to be utilized, grow, and pass on.  

Understanding Split-Dollar Life Insurance: What You Need to Know

In a rapidly changing financial landscape, split-dollar life insurance plans have become a tool for business owners, high-net-worth individuals, and sometimes employees. 

First, every split-dollar plan involves an agreement between two parties–typically an employer and an employee or business owner and themselves–sharing the cost, benefits, and ownership of the policy. 

The company pays the premiums, but the insured is the policy beneficiary and can borrow against its cash value while still alive. Other benefits of split-dollar plans are the ability to maintain flexibility, and are customizable to suit the individual needs of different parties. If you are looking for ways to lower your tax bill while also creating financial protection for yourself and your family, a Split-Dollar plan should be something that would be valuable to your financial toolkit.

What Is A Split-Dollar Life Insurance Plan?

Split-dollar life insurance is a contract where two parties agree to split the expenses and advantages of a permanent life insurance policy. Real estate investors can utilize split-dollar plans to offset their tax liability while maintaining access to their money, which provides notable benefits in lowering costs while at the same time increasing your financial stability, creating extra income that you can utilize during retirement tax-free and pass on to your children.  

Working with a qualified CPA, Attorney, and Life Insurance agent, the money that would have been considered as regular income is “split” between personal and corporate income. This is the starting point for tax savings. We then use a Cash Value life insurance policy tailored for cash savings and growth, not death benefit, to hold the money as income for the corporation. The owner and beneficiary of the said policy can use the Cash value as they see fit. This setup is somewhat simple. However, it is highly regulated and commonly audited which is why the policy formation must be prepared and administered by qualified professionals.

Example Of A Split-Dollar Life Insurance Plan

Imagine John, a successful entrepreneur who has a pretax income of $200,000 that he pays to himself from his company. John is tired of losing so much of his income to taxes and sees value in leaving a legacy of financial security to his family. So John decides to work with a group of professionals to create what tax savings he can.

With the plan in place, John will continue to take $86,000 as regular income lowering his personal income from 32% to 22%. The remainder of his $200,000 income will be dispensed into a C-Corp specifically set up for this purpose. His C-Corp will realize the $114,000 as income and pay corporate income taxes on that money. Instead of paying 24% and 32% in income tax had John taken that money as personal income, the C-Corp pays 21% and lowers John's tax debt. At this point, John can’t touch the money, and if he does, he has to pay personal income tax on it.  

Once the taxes have been paid, the C-Corp will purchase a Cash Value Life Insurance Policy on John, and one of the benefits of this Cash Value policy is that John can access the money inside of the policy “tax-free.” This Life insurance policy is not your regular, “I want life insurance” policy. It is a highly customizable, adjustable, and unique policy that is built specifically for the purpose of these plans.

So the net benefit is that John pays less in taxes, maintains access to the money, and builds a financial nest egg in the form of a life insurance policy that not only offers a way to pass on what John has worked so hard to build, but also acts as leverage for John to grow and expand financially, at a rate that he wouldn’t have otherwise.   

Advantages Of A Split-Dollar Life Insurance Policy

Split-Dollar Life Insurance plans contain a lot of advantages for those who are capable of utilizing the structure. The parties involved in a split-dollar arrangement come to an agreement to share in the costs of the plan and thus share in the benefits. If you are the sole proprietor of your business, then you are splitting the benefits with yourself. If your business operates as a partnership, each partner can set up their own split-dollar plan.  

Split-dollar life insurance policies benefit those who want to:

Disadvantages Of Split-Dollar Life Insurance

There are some drawbacks to split-dollar life insurance, including the following:

When evaluating whether split-dollar life insurance is right for you, consider and understand the following:

Key Takeaways

A split-dollar plan is an arrangement between two parties to share the costs and benefits of a permanent life insurance policy. The benefits of a split-dollar life insurance policy include:

In conclusion, a split-dollar insurance plan can be an excellent fit for a real estate investor. Schedule a meeting to review all the key points, including the benefits and drawbacks of the plan.

This article has been written for educational purposes only and is not financial advice nor a recommendation for anyone to utilize the strategies discussed herein. Work with certified Tax and Financial advisors to determine the right solutions for you and your financial situation.   

Secure Your Family's Future with Term Life Insurance

Term Life Insurance is designed to protect you and your family for a specific period of time. These specific terms are usually anywhere from 10-30 years. Term Insurance is a straightforward option for providing lots of coverage at a very affordable cost.

It might be the perfect option if you're looking for a reasonably priced way to protect your family. It provides temporary coverage at a fixed price, making it affordable and flexible. Considering both the advantages and disadvantages before investing in a policy is essential.

What Is Term Life Insurance?

Term Life insurance is a legal and binding contract between the policyholder and an insurance company. These policies usually have a length of time clause ranging somewhere from 10-30 years. Should the policyholder pass away during this specified period the insurance company will pay the specified sum of money to the beneficiaries of the policy holder. A good life insurance policy will also include LIVING BENEFITS, these offer coverage for things such as chronic, critical, and terminal illnesses such as heart attacks, strokes, or cancer. They can also be used for long term care. 

During the specified term the policy holder typically pays a level premium into the policy and if anything happens to the policy owner the policy will pay out what is called the death benefit.  Triggering events for a payout can also include such things as critical illness, disability, and long term care. Which means that you could get money while you are still alive to help pay for what could be catastrophic medical and long term care expenses.

Policy Characteristics

Why Is It Attractive?

Many people find term life appealing because it offers significant coverage at a reasonable price. Unlike permanent life insurance policies, term life policies have no cash value and are less expensive in terms of paying for death benefit  than whole life insurance.  Added on top of that all proceeds from life insurance are tax free.  Which means that your loved ones get everything that you wanted to leave them.

Term Life Insurance offers flexible coverage from annual renewable terms all the way up to 30 years. It is designed for and meant to help individuals and families cover the costs of living should you lose your ability to provide for your family due to death or critical illnesses. The money can be used to pay off mortgages, fund children's college tuition, or help reestablish your life after the crushing loss of a loved one.

Current market trends also drive more people to purchase term life policies. 

How Does It Work?

Decide how much insurance you need by following one the 4 calculation methods, DIME, 10x annual salary, 4% rule, or $50,000/child/year until 18, college tuition costs, and payoff mortgage.

After getting approved and having a policy in place, should anything happen to the policy holder the specified beneficiaries will submit a claim to the insurance carrier and will be paid out the death benefit.

If the policy owner has a triggering event while they are alive that is covered through the critical, chronic, terminal, disability, or long term care sections of the policy the insurance carrier will pay out the specified portion of the death benefit to the policy holder.

Benefits of Term Life Insurance

Potential Drawbacks

The Pros And Cons



Factors To Consider When Purchasing

Consider several factors, including age, dependents, and financial goals:

Key Takeaways

Regarding financial security, buying a term life insurance policy is an option for the budget-minded investors who aren’t ready for the financial leverage that permanent life insurance policies can offer. It's essential to remember that it is temporary and won't accumulate any cash value over time.

It's crucial to consider variables like:

Don't wait any longer - schedule a meeting with our team today. With our expert advice, you can make informed decisions about your investments and ensure that you protect your assets from potential risks or disasters.

Getting the Right Insurance

As a real estate investor, getting the right insurance is among the most important things you can do to protect yourself, your family, and your business. Getting the right insurance means buying the right mix of policies and protections. 

Join Aaron Porter, Royal Insurance Manager, as he discusses how a specialized agent helps provide holistic protection for your family, business, and legacy in "Getting the Right Insurance."

This article discusses the best practices for finding and buying the right mix of insurance to protect your family and assets.

What's Important About Getting The Right Insurance?

Getting the right insurance is essential, even if the upfront cost seems expensive. Moreover, you can't put a price on the peace of mind, emotional well-being, and financial freedom protection that insurance provides. 

Royal Insurance enables you to save time and money by proactively seeking the correct coverage for your needs, including the following: 

Getting The Right Insurance: Homeowner And Auto Insurance  

Getting the proper homeowner and auto insurance is critical because it reduces the money you have to pay out of pocket if the worst happens. The cheapest policy is rarely the best and may leave you holding the bag in the event of an accident. 

You need to determine the amount of coverage by identifying the following: 

When selecting a provider, it's better to work with a single, nationwide agent with access to many carriers with superior customer service and claims payouts. Every year, you and your insurance agent should go over your specific circumstances to adjust your coverage level. 

Getting The Right Insurance: Rental Property And Casualty Insurance

Getting the right insurance for your rental properties includes discussing the following with your real estate agent: 

In most cases, the type of policy you'll want to get is a Landlord/Dwelling DP-3 policy. Most DP-3 policies cover the following: 

When you get the policy, your name will go on the policy; then, your agent will add your Land Trust and your operating LLC as additional insured on the property. 

Other people to include in the policy are the following: 

For personal liability, you must have the required minimum for an umbrella policy to activate in the case of a claim. 

Getting The Right Insurance: Umbrella Policies

An umbrella policy is additional insurance that provides more protection beyond your existing insurance's protections. Getting the right umbrella insurance enables you to leverage the policy as a cost-effective supplement and amplify your underlying insurance. 

The general rule to determine the coverage you need for umbrella insurance is that it should equal your net worth. 

When determining the amount of insurance you need, identify your replacement cost. That is the cost of your initial investment and appreciation. 

Why would you voluntarily pay more? The insurance company will be less likely to claim a lower payout based on depreciation. 

They'll be more inclined to:

Getting The Right Insurance: Business

There are many factors in getting the right insurance for your business. Your agent and carrier need to know how your company operates and how you plan to grow to have insurance tailored to your specific needs. 

As your business grows and adapts to change, you need business insurance that evolves and adapts to your needs. To make sure you get the most out of your business insurance, you should: 

Getting The Right Insurance: Life

You have the option to get term or whole life insurance. Getting the right insurance depends on your financial circumstances and the protection you need.

Term Life Insurance

Term life insurance is a type of life insurance that covers a specific time, like 30 years from the start date. The best term life insurance has the following minimum coverages:

Your age and health are the two most impactful cost factors for term life insurance. 

Whole Life Insurance 

Whole life insurance provides a death benefit, accumulates a cash value, and covers the insured's entire life. You can customize the policy's parameters, including the following: 

Getting The Right Insurance: Key Person Insurance

Key person insurance protects your business operations. A key person or key man policy creates a funding mechanism resulting from an insured person dying or becoming disabled.

If the insured dies or becomes disabled: 

You'll need to review the coverage required for each key person periodically. 

Key Takeaways

Insurance is crucial for protecting your family, real estate, and business. To fully protect yourself, getting the precise mix of coverage and policies is imperative. 

Learn more about the right mix of strategies for you as a real estate investor in Royal Investing Group Mentoring. We'll discuss the finer points of asset protection, tax savings, estate planning, and investment opportunities that will support your investing goals.

Key Person Insurance To Protect Your Profits

We'll review how to mitigate the financial loss when a key person dies through a key person insurance policy.  

Preparing for someone's death seems macabre. No one likes to think about the eventual demise that we all face.

As the adage goes, failing to plan is planning to fail. And in the arena of real estate, that saying is incredibly prescient. 

What Is Key Person Insurance? 

Key Person Insurance is something that can be provided for any person inside of your company who holds critical pieces for the company's continued operations. The company is the beneficiary and pays the premiums. 

In a small business, a key person is usually an owner, the founder, or perhaps a critical employee. The main qualifying point is whether the person's absence would cause significant financial harm to the company. If this is the case, key person insurance is worth considering.

How Does It Work?

Under a key person life insurance policy, the business owns the policy, pays the premiums, and is the beneficiary. If a key person dies, the company then collects a death benefit. You or your partners can use that money to help a business replace lost revenue as they search for a replacement.

This type of insurance can be crucial for a business that relies heavily on the health and well-being of a key individual. 

What Are The Benefits?

One of the significant benefits is that should the "key person" become disabled; your insurance coverage can step in and pay up to 100% of the death benefit if needed.

The money can be used as a financial cushion to buy time for the company, sometimes just a small family business, to find a new person to step in, to sell, to shut down, or implement other strategies that can save the company. 

Key person insurance gives your company options other than fire selling or bankruptcy, which happens when you lose the key person.

The coverage for key person insurance can be as low as $100,000 or up into the multi-millions of dollars.

Another aspect of this insurance would be employee retention. 

In the employee's contract, you can state that a percentage of the life insurance policy would go to the family should death or disability happen while employed by your company. These types of term policies can be very inexpensive and have a massive benefit to your company.

Both of these strategies can be instrumental to ensuring that you, your family, and your businesses grow and maintain the financial freedom we are working towards.

What Can Key Person Insurance Protect Against?

Key person insurance protects the company against risk and protects profits and partners. 

Protect profits

The insurance will counteract the lost income from sales or disrupted operations that the key person is involved with. 

The company may use the death benefit to cover the costs of recruiting, hiring, and training a replacement for the deceased. 

Or suppose the company cannot continue to operate. In that case, the insurance allows the business to pay debts, provide cash for investors, cover severance for former employees, and will enable the company to close down without chaos. 

Protect partners

The insurance enables the surviving partner(s) a cash infusion to buy out the key person's stake in the business. Combined with a buy-sell agreement, these two types of protections ensure an orderly continuation of the company. 

How Much Does Key Person Insurance Cost?

The cost depends on how much insurance a company needs. However, this insurance will cost less than bankruptcy if the worst happens to your key person. 

Some factors that you may need to consider when researching include the following: 

The cost also depends on whether you buy a term or a permanent life policy. Typically, term life is cheaper. 

Like any other insurance, the individual's age and overall health will determine the insurance cost.  

Key Takeaways

Key person insurance is a life insurance policy that protects a company in the event of the death of a key executive or other critical individuals. 

Insurance is necessary if an employee's death is detrimental to the company and disrupts the operation of the business. 

The key person for small businesses is typically the owner or founder. The company pays the insurance premiums, is the policy's beneficiary, and will receive the death benefit if the person dies. 

Investing in proper protection is critical to mitigating your company's risk. Otherwise, you'll be in trouble when a key person dies. That means you need reliable insurance specific to your needs as a real estate investor. 

If you want to learn more, check out our article about the challenges faced by real estate investors. It could be the difference between life and death–for your business.

Buy-Sell Agreement Fundamentals: Proven Protection

We can't predict the future, but we can plan for it. To help your business run smoothly and continuously, you should consider a Buy-Sell Agreement. These agreements help you out if you or a partner decide to leave your real estate investment business, die, or cannot participate in the company. 

A Buy-Sell Agreement is a contract that benefits any business that has partnerships. These agreements answer any question about the company's operation going forward and mitigate the harm of someone unexpectedly leaving the partnership for any reason. 

What Is A Buy-Sell Agreement?

A Buy-Sell Agreement is legally binding and determines what happens to a partner's share of the business if the partner leaves or dies. The agreement is designed to protect all partners in the company equally and is a reliable way to secure the future of your business. 

It might be helpful to think of a Buy-Sell Agreement as a business prenup that stipulates how a partner's share of a business may be reassigned or sold to other partners if a partner: 

Other names for a Buy-Sell Agreement include a buyout agreement or a business will. 

Why Should I Create A Buy-Sell Agreement? 

A funded Buy-Sell Agreement has multiple benefits that protect your business because the agreement:

Handles the sale of shares easily

The agreement provides the business with the following: 

The other partners in your business are motivated buyers and know exactly how much the leaving partner’s shares are worth.  Because that pricing has been agreed upon the sales process goes more smoothly and the family of the partner that has passed on gets a substantial payout that helps the family to maintain, grow and ease the pain of their loss.

Prevents unwanted ownership situations

A Buy-Sell Agreement keeps the shares between partners or within the business. By design, it prevents: 

Can provide extra sources of capital to grow the business

One possible funding source comes from Cash Value Life insurance policies taken out by the business on each partner. When you use a life insurance product to fund the agreement, these agreements can help the business grow by utilizing the cash value of an insurance policy. 

By utilizing life insurance to fund your Buy-Sell agreement, when/if something happens to one of the partners in your business the Life Insurance policy has a death benefit that is going to pay out enough money that the partners that are still working in the business are able to purchase the shares of the partner who is no longer. 

Mitigates tax liability

If you have an agreement in place and a partner dies, the IRS will view the sale as authentic and not a disguised gift. It helps the decedent's estate avoid potential gift tax. 

Who Funds a Buy-Sell Agreement?

Businesses often use buy-sell agreements to make transitions more manageable when a partner dies or leaves the company. 

Usually, a Buy-Sell Agreement stipulates that the business share be sold to the company or remaining partner(s). That begs the question, who pays for the shares?

One option is that the partners buy life insurance for each other. The company can pay for the life insurance policies and claim it as a business expense. 

When a partner dies, the life insurance will pay out a death benefit to the other partner(s). The partners will use the proceeds of the death benefit to buy the dead partner's shares from their estate. Thus, the business continues to operate, and the ownership is consistent.

A particular category of insurance, Key Person Insurance, provides an additional layer of protection to your company. 

What Is Key Person Insurance?

Key Person Insurance is a life insurance policy that protects the business from losing an essential partner or person. It's a meaningful way to protect the daily operations of your business. 

When a key person like a founder or owner dies, the company typically is in dire straits because of the death: 

Key Person Insurance protects the business by: 

Keep in mind that you will need to undergo periodic insurance reviews to determine the amount of coverage necessary for each key employee.  

Protecting Your Business

Old WayOld Result
Trust that a family member can take over for you automatically upon your death Key Person’s death causes a revenue drop by 60% on average
Partnership without a Buy-Sale AgreementLose key employees
Only mandatory insurance policies  Family and partners are left to pick up the pieces of a broken business
New WayNew Result
Legal agreements that plan for a partner's death or disabilitySmooth transition in case of tragedy, 
can be used for death or disability
Includes a life insurance policy to ensure cash is on handCash allows the business to survive
Made with attorney oversightThe business owns Cash Value life insurance
which can be used as collateral to obtain financing

Key Insights and Takeaways

A Buy-Sell Agreement determines when and to whom you can sell your part of the business. It also specifies an agreed-upon price and fair conditions for sale. 

A life insurance policy guarantees there is cash to execute the agreement if there is a death or disability. 

Typically, a disability is more likely than death, and it has virtually the same impact on a business. Funding for disability is an added layer of protection for you and the company. 

You can set up policies to provide a dividend as a deferred compensation plan. That plan supplements retirement income (SORP, SERP) and provides a death benefit. 

Do you have questions about how to protect your real estate investment business? 

Royal Legal Solutions has answers! Read about some common issues real estate investors face and how we can help you secure your financial future. 

Save Big By Planning For The Inevitable With A Funeral Policy

It’s not something we like to talk about. Death. But you should have a funeral policy set up for your beneficiaries. 

Why would you want to expend emotional and mental energy to plan for your inevitable death? 

A funeral policy saves your beneficiaries the hassle of dealing with thorny legal and financial questions while they're mourning your passing. A good plan protects your heirs' time and money and frees them up to navigate the difficulty of dealing with your death. 

What Needs to Happen When You Die?

Some actions need to happen when you die so that your life insurance policy pays out the death benefit to the appropriate beneficiaries. Here is an attenuated list: 

Guarantee Results With An Urgent Claim

For a death benefit to pay out, there must be a claim. No one notifies your insurance agent of a policyholder's death. That's why your beneficiaries must be aware that they are and are in a position to make a claim. 

Here is a list of items that you and your beneficiary should have access to so that the claim is as painless as possible: 

Quick And Easy Proof Of Identity

Your beneficiary should have all the documents they need to make a claim. The next step is to provide proof of identification. Typically, a state-issued ID and a passport are the most convenient and best proof of identification.

Monumental Importance Of The Certificate Of Death

certificate of death is an official, legal document issued by a medical professional that states when a person died. Your beneficiary must send the death certificate with the beneficiary's claim. Generally, there will be an investigation, which can take an extended time, anywhere from two days to three months.

When you get the certificate of death, you'll want to get 10-15 original, certified copies from the medical examiner, the state, or the coroner, depending on who issues the certificates. You'll need these original, certified copies to send to: 

The Truth About Carrier Investigations

Once the insurance carrier gets the claim and the certificate of death, they also conduct an investigation. This investigation can vary in time; usually, it takes between 2 weeks and 6 months. 

Timely Access To The Death Benefit or Funeral Policy

From the time you die to the time the death benefit pays out may take several months. When the money is ready, it can be delivered in two ways: directly to the beneficiary or through the insurance agent acting as an intermediary. 

The better option is for the check to come directly to your beneficiary. An insurance agent may unduly influence someone who is grieving, emotional, and just inherited a sum of money. When your beneficiary gets the death benefit, it may be large enough that they need to consult a financial advisor to manage the funds. 

Life Insurance Funeral Policy Timeline

Your Beneficiary Got Funeral Policy Money; Now What? 

The beneficiary can use the money at their discretion. Once the beneficiary gets the funds, there can be claims against the proceeds. Some examples of claims that your beneficiary might have to deal with: 

You can mitigate this risk with purposeful estate planning

What Is My Beneficiary's Tax Burden? 

The death benefit payout is tax-exempt, so your beneficiaries will pay no taxes on the principal amount. 

Suppose that your beneficiary receives the death benefit and then invests the money. Any subsequent gains on the principal are taxed. 

Another way that your beneficiary might pay tax is with the nature of the policy's purchase. If you bought the policy using a corporation and wrote off the taxes as an expense, the beneficiary will have to pay taxes on the death benefit. 

Key Differences: Prepaid Funeral Vs. Final Expense Policy

The median funeral cost in 2021 was $7,848, and the average funeral cost is $9,914

PrepaidFinal Expense
Deals directly with the funeral homeDeals with the actual insurance carrier
Discounts of 10% to 15%Discounts of 50% to 80%
Paid in full before deathPays out as fast as 3 to 5 days

Final expense policies cost about $3,000 to $5,000 and provide about $10,000 to $20,000 in coverage, and you pay a monthly premium or a single payment. 

What Is A Modified Endowment Contract (MEC)?

A whole life insurance policy has two components: the premium that funds the death benefit and the policy's cash value. 

When you buy a life insurance policy, you pay your premium. If you overpay the premium, the IRS no longer considers it a life insurance policy; instead, it becomes a modified endowment contract

A modified endowment contract might be a valuable way for your to protect your money: 

Key Takeaways

No one wants to think about dying, but you want to leave behind a legacy and generational wealth for your heirs. To ensure their future, you should plan to use all means available to you. One aspect of estate planning is a life insurance policy. 

Here are the key things you need to do to prepare your beneficiaries for your eventual passing: 

Royal Legal Solutions helps real estate investors protect their assets. Secure your financial future, and sign up for our FREE Insurance Quiz

Property Insurance: Pros and Cons of Cash Value vs. Replacement Cost

While sifting through a 40-page property insurance policy, have you ever wondered–do I need this? You're not the only one to have that thought. 

Insurance is sometimes enigmatic and inaccessible to people. This situation is worse for a real estate investor because you may have multiple properties. That means multiple insurance policies for you to pore over. You may be thinking, Which is better–cash value or replacement cost? What type of property insurance is right for me? Do I need to have my trust name on my policy? 

These are quotidian questions; everyday real estate investors like you wrestle with insurance questions. To help, here are 3 straightforward insurance explanations.

#1. Cash Value Vs. Replacement Cost: Pros And Cons

After a claim, the cash value is the amount of cash needed to repair or replace your property. The cash value of the property is affected by depreciation. In other words, the cash value is what the property is worth today. 

Here is another way to envision cash value: Cash value = cost to buy your property new - depreciation of property. That’s called the depreciated cash value. 

The pro of actual cash value policies is that there is a cheaper premium. That means you pay less cash over the life of your policy. The con is that if you suffer a loss, the actual cash value might not be enough to cover the total cost. 

The replacement cost is the money needed to repair or replace your property. Replacement cost replaces your property without a depreciation deduction. 

The pro of replacement cost is the payout in a loss covers the cost of the property. The con is that your premium will be higher over the policy's life. 

Determining which option is best for you is a personal decision. You have to assess your risk tolerance and decide how much coverage you're willing to buy.

Suppose you have a $200,000 property. You've owned the property for one year with a depreciation rate of 3.5%. You had a total loss that was covered by your insurance policy. 

#2. What Property Insurance Is Available To Me?

Landlord insurance is a type of property insurance available to you. Generally, landlord insurance covers:

In some specific cases, your property insurance will cover rent lost. Landlord insurance will usually not cover:

Landlord insurance isn't a legal requirement in most cases. But, your lender may require it if you're financing the property. 

Property Insurance For Real Estate Investors

Real estate investors use rental dwelling policies (DP) to protect their assets. The different levels of dwelling policies are:

DP1 Property Insurance

DP1 is a basic property insurance policy. It's usually the cheapest and covers named perils in the insurance policy. Here are a few examples of what a DP1 policy commonly covers: 

Often, DP1 is a cash value policy. Imagine a car wiping out your 10-year-old porch. The materials used to build your patio are old. Suppose it costs you $20,000 to replace your porch. In that case, the insurance may only give you $13,500 because the materials have depreciated 35% over those ten years. You'll be on the hook for $6500. 

DP2 Property Insurance

DP2 is the average property insurance policy. It is also a name peril property. Some common perils you might find that DP2 policy covers include:

DP2 policies are usually replacement cost policies. There is no depreciation deduction, and it covers more events. 

DP3 Property Insurance 

DP3 insurance provides the most coverage for real estate investors. It is a non-named peril policy or an open policy. That means it covers all perils except for a very few. In general, a DP3 insurance policy will not cover:

DP3 insurance is a replacement cost policy. That means no matter the age of your home. The policy pays for the total replacement value of the property. No depreciation. 

DP3 also offers loss of rent protection. That protection occurs when your home is unlivable due to a covered peril. While repairs are ongoing, the insurance policy pays out rental income. 

Intentional Loss, Windstorm, and Hail Exceptions

A word on intentional loss. One of our clients shared this anecdote. He was a property owner. The property burned down. Neither he nor the tenant was accused of arson. The insurance company will not pay out. It would be best to ask about your protection against arson when shopping for your policy. 

Windstorm and hail coverage is another thing that can catch unsuspecting real estate investors off-guard. Your windstorm & hail policy might determine your cover based on the following: 

Each of those factors could add risk. Risk means a higher premium for you. Work with an agent you trust to get the right coverage for your properties. 

#3 I Have A Land Trust; Do I Include It On The Policy?

Yes, include the name of the land trust in the insurance policy. The insurance company will deny your claim if the land trust appears on the deed but not your policy. 

What if I don't have a land trust? 

You may be exposing your assets. Don't get caught with your pants down in the event of a lawsuit. Check out how a land trust can cover your assets and provide protection through operational anonymity.

Recap: Cash Value Vs. Replacement Cost

Property insurance is a requirement for real estate investors. While it may not be legally required, lenders will not let you borrow without insurance. Your risk tolerance will guide what insurance policy is right for you: 

Insurance is your first line of defense against accidents and natural disasters. Things get complicated for real estate investors as more assets are acquired and more policies need to be purchased. Learn how we can offer you a single point of contact and the best coverage for all of your policies by booking a free discovery call.

Insurance Challenges Faced by Real Estate Investors

Getting solid insurance for real estate investors is a pain. It's time-consuming and confusing. Most investors struggle to juggle multiple carriers and policies.

Does that sound like you? You're in the right place.

I'll show you a way for you to streamline the insurance process, how it works in your asset protection plan, common issues you probably experience with your insurance, and how Royal Legal Solutions can help.

Where Does Insurance For Real Estate Investors Fit In My Protection Model?

Insurance for real estate investors is your first line of defense in protecting your assets.

The first advice you got as a real estate investor was, "buy deals." It's excellent advice and the first step in securing your financial freedom. Typically, that's where mentorship stops, and there is an information void on the next steps you need to take.

We're here to tell you that the next step is securing reliable insurance for real estate investors. Typically, banks require you to get property insurance to cover natural disasters like fires and floods. In addition, your property insurance provides partial protection (with some exceptions) if an accident occurs on your property.

You acquire more assets and need more policies as you invest in real estate. Thus, your insurance situation becomes more complicated. For instance, savvy real estate investors who want more asset protection also get umbrella insurance.

In general, an umbrella policy covers:

Remember, insurance is your first defense against accidents and natural disasters. Things get complicated for real estate investors as you own more assets, so you must purchase more policies.

What Issues Accompany The Insurance Process?

Some of the issues you might encounter when getting proper insurance include:

The lack of a holistic solution drives the risk of having unacceptable levels of coverage. You could be paying for more than you need or have gaps that make you vulnerable.

Reach out to discuss how Royal Legal Solutions can offer you a single point of contact and the best coverage for your liability, life / whole life, and annuities insurance. That frees you up to focus your energy on your business goals.

Why Do I Need Insurance Specific To Real Estate Investors?

It would be best to have insurance tailored to your needs as a real estate investor to provide total, bulletproof protection to your assets.

The reality of being a real estate investor in our litigious society is that someone will sue you one day. The question is, will you be proactive or reactive?

Your property insurance is limited to accidents and low-dollar claims. Luckily, it will cover most of the risk most of the time. Insurance is the most cost-efficient way to protect your property. Still, the way you get insurance is a sometimes laborious process.

The old way of finding insurance through a large commercial carrier is cumbersome. You have to deal with multiple points of contact who do not know your specific needs as real estate investors. That is a time and cost-inefficient system.

The new way of getting insurance finds real estate and small business specific providers that:

How Is Royal Insurance For Real Estate Investors Different From My Current Insurance?

Royal Insurance for real estate investors is a service level agreement that acts as part of the RLS one-stop shop for bulletproof protection. It works in conjunction with our:

The value comes from having a single, dedicated point of contact with Royal Legal Solutions. With a streamlined, single point of contact, you will have direct access to our insurance wing for assistance with the following insurances:

Our provider network consists of:

We will tailor your coverage specifically to your situation. The way we do that is with our provider network. That extensive network makes the providers compete and gives you a market edge. Ultimately, you will save money, cover any gaps, and reduce time wasted trying to contact an agent. And the best part? Our focus is on real estate investors and the nuances they face carrying multiple policies on various properties. Simplify your life with a single point of contact for all of your insurance needs.

Take our insurance quiz to get started and book your consultation.

If I Have Bulletproof Protection, Why Do I Need Insurance?

Insurance for real estate investors is its system of protection. Your LLC is the fallback position after your insurance carrier either pays the coverage limit or fails to protect you.

Cases in which your insurance will not protect include (but are not limited to):

You want to stack protections. That's when your LLC covers the rest via asset protection with your anonymity structures in place.

Key Takeaways

It's critical to invest in proper asset protection to mitigate your liability and risk. Otherwise, you'll be in a rough spot when you get sued, and the lawyers come calling. This means you need to get reliable insurance specific to your needs as a real estate investor.

If you want to learn more about how to protect your assets (and, by extension, your livelihood), watch the replay of Royal Investing, Episode #18: Insurance Challenges Faced By Real Estate Investors, with Scott Smith.

Real Estate Insurance: What Investors Need To Know

As real estate investors ourselves, we like insurance. We use it for our personal investments and frequently advise our clients to do the same. 

An insurance policy can help you limit your liability, and it’s always a good idea to get an agent to explain your best options. However, it’s important for investors to understand that there is an appropriate time and place for insurance. 

Let’s look at what insurance is, what it isn’t, and some examples of the role insurance plays in your asset protection strategy.

What Is the Difference Between Insurance and Asset Protection?

Insurance is great to have, but it should not be confused with an actual asset protection strategy. While it can certainly protect you in specific situations, insurance will not effectively prevent the vast majority of lawsuits that most real estate investors face. Thinking of insurance as a component of your asset protection strategy is fine, but it is not a substitute for a thorough asset protection plan.

It’s important to realize that the insurance companies are running a business. As a result, if you make a claim for something that is not covered, you may not just be denied. They may decide you are too big a risk to have as a client and drop you.

Real Estate Insurance’s Benefits and Limitations

An investment property insurance claim usually results from a “slip and fall” on a property or something else you would normally characterize as an accident. Typically, this is what your insurance is willing to cover. But the definition of “accident” is something that insurance can and will debate with you. Spoiler alert: the insurance company usually wins. Let’s take a look at some examples that show how insurance claims work in the real world.

Example 1: Insurance Working for Its Intended Purpose

Let’s imagine for a second that you own a condo in New Jersey. You bought the property at a nice price and hire some contractors to fix the place up. One night, a storm hits. Your contractor comes into work the next day to replace the flooring, and slips on the icy sidewalk. He sprains his ankle, but one Urgent Care visit and a few days later, he is back at work.

This is the exact type of situation a general insurance policy is likely to cover. Insurance in this case keeps you from being personally on the hook for the contractor’s medical expenses and other costs of the injury. In this case, insurance worked exactly as it was supposed to. Our next example looks similar, but has a completely different outcome because of how insurance works.

Example 2: When Insurance Isn’t Enough

Suppose you own a two-story duplex. Prior to making the purchase, you had a friend do the inspection of the property to save money. You upgrade some appliances, but otherwise rent it out as you bought it. 

Your tenant for the upstairs unit, Sabrina, is a 55-year-old teacher. One evening, Sabrina is taking a shower and the tile floor splits apart, and she comes crashing through to the first story. Sabrina is badly hurt and requires six weeks of hospitalization, multiple surgeries, and extensive physical therapy for the next year. Her doctors indicate that she may be permanently disabled. 

She is naturally extremely upset.

You call your insurance company, who sends out an investigator to assess the scene. It turns out that your upstairs bathroom was missing a shower pan, which caused the floor to rot to the point that this accident was possible. Of course you never intended for anyone to get hurt, but the insurance company denies you coverage by claiming you were “grossly negligent.” 

Why? It was on you to get the inspection done and make the appropriate repairs that could have prevented the accident. At least, that’s their position.

You will be seeing Sabrina in court soon, where she is now seeking a $750,000 judgment for her many expenses as well as her pain and suffering. Your insurance company won’t touch this situation with a ten-foot pole.

This is far from the only situation where insurance won’t protect you. Some other scenarios you can’t expect insurance to cover include:

You may be wondering what recourse you have if your claim is denied. Basically, your only option is to sue your own insurance company. So you’d have TWO expensive, stressful lawsuits on your hands, and the odds are not in your favor. Remember that these are big companies with deep pockets for extremely skilled attorneys. Your resources are better spent funding an asset protection plan before there’s a problem than fighting with an insurance company after the excrement hits the fan.

Use Insurance in Conjunction with an Asset Protection Plan

Insurance Should Be Your First Line of Defense.

Common sense tells us that investors should protect themselves with an appropriate insurance policy for each rental property. Renting property that is not covered by insurance is extremely foolish at best, and at worst, illegal. If you were to experience a situation like the first example in this lecture without insurance, you could easily be personally liable for the entire affair and all of its costs. This could include medical expenses, lost wages, pain and suffering, and more. These bills can become astronomical, and insurance will indeed protect you in personal injury situations. Learn more about the appropriate use of insurance from our free educational resource on tenant injuries and landlord liability.

You will have options when selecting your insurance policy. The best policy for you will depend heavily on your situation. For your convenience, we have made a handy list of essential questions to ask your insurance agent.

Insurance Should NOT Be Your Only Defense.

As you can see, insurance has some hard limits on what is and is not covered. Real estate investors should absolutely have insurance, but expecting it to provide total asset protection is like expecting a drill to do a saw’s job.

Smart investors should incorporate insurance into a greater asset protection strategy that includes appropriate entities, trusts, and well-written contracts. We will explore these details later in the course. The takeaway for now is this: be proactive, not reactive. Don’t wait until you’re threatened with a lawsuit. Have a plan in place that includes insurance and more powerful defenses.

Retirement Plan Options: All About Indexed Universal Life Insurance

When making business decisions that affect your long-term goals, like what types of investments to make with your retirement dollars and which vehicles to use, it really is best to be aware of all of your options. We frequently talk about the Solo 401(k) and Self-Directed IRA as tools for funding your retirement. But what about life insurance? And what about the stock market? What if we told you there is a tool that allows to to reap some benefits of both? It's called Indexed Universal Life Insurance--and some investors have found it a useful addition to their retirement plans.

What Is Indexed Universal Life Insurance?

Indexed Universal Life Insurance (IUL) plans are a variety of permanent life insurance plan that features a cash-building element. One primary benefit of these plans is that the policy holder gets some of the gains of being associated with the stock market without all of the risk Wall Street is famous for. This is in no small part because of how these policies are designed. IULs earn in part because they are directly linked to a market index, such as the Dow or the S&P 500.  Any gains remain within the policy, albeit a cap rate will limit how much you can make. However, you are protected during a particularly bad year for your index with an IUL. The worst case scenario with these plans is that you make nothing, but you never actually lose money no matter how poorly your index performs. The protection of your principal is actually derived in part from the same cap rate that limits your gains.

How much money do policyholders stand to make? Historically, returns run between 5-9%. The S&P Index has actually returned at 9-11%, but the upside limit on UILs stems from the account's cap rate. For this reason, many advisors argue that the UIL can make a wise addition to a retirement or estate plan once more traditional and self-directed accounts are maxed out.

Tax Benefits of Indexed Universal Life Insurance (IUL) Plans

There are three key tax benefits of IULs. First, you may pay into the policy with pre-tax or after-tax funds. Withdrawals from the policy may be made tax-free if you are under 59 1/2. Such withdrawals are regarded as loans, with your death benefit serving as collateral. Any funds paid out to the beneficiary are also tax-free, including normal benefits upon your passing. This is true regardless of their value.

Ask the Experts at Royal Legal Solutions About Your Retirement Planning Options

Regardless of where you are in the retirement planning process, Royal Legal Solutions an assist you. We have extensive experience educating investors about self-directed investment options. Many of our investor-clients love our Solo 401k information, product, and compliance services. Our Self-Directed IRA services can also be helpful for retirement planning, as the SDIRA is yet another vehicle that allows you to diversify and take total control of your investments. To determine which of the available retirement planning strategies are best for you, consult with one of our experts at Royal Legal Solutions. You may also contact us with any questions you may have about your options.

Tenant Injuries: Landlord Liability and Insurance FAQ

Even a good landlord occasionally finds themselves in a tricky situation. When a tenant injures themselves, there are a number of situations in which a landlord could find themselves liable for the injuries. This is especially true in instances when the tenant has just moved in. Central to the question of liability for premises and personal injury lawsuits is the role of negligence.

In order for a tenant to make a successful case against their landlord, they must be able to prove that the landlord was negligent in their duties to maintain a safe residence. What precisely does this entail?

The Role of Negligence in Premises Liability for Landlords

In order for a landlord to be held negligent in a premises liability suit, the tenant/plaintiff must be able to prove that either:

  1. The landlord knew about the safety hazard and did nothing to correct it
  2. That landlord should have known about the safety hazard

The first criterion pretty much speaks for itself. A tenant makes a landlord aware of an issue, the landlord doesn’t act on that information, and then a tenant or guest is injured because of the safety hazard. This is when the landlord could be liable for the damages.

The second criterion means that negligence can be inferred circumstantially under different situations. For instance, a landlord cannot claim ignorance of the fact that there is lead-based paint on their premises. Nor can they claim ignorance of the fact that any materials that were used in the construction of the property are potentially hazardous. The landlord is expected to know this information and to disclose it to anyone that is paying to reside in the property.

In addition, negligence can sometimes be inferred when a landlord does not provide a careful inspection of the premises before a tenant moves in. If the tenant is injured or has property destroyed due to a preventable and obvious problem on the premises, they can be held liable for damages and injuries.

How to Minimize Premises Liability for Landlords

It should not be a shocking revelation that landlords who keep their premises in excellent condition seldom lose or even have to fight premises liability lawsuits. Making a careful inspection of the property before a new tenant moves in and responding to tenant issues promptly will absolve a landlord of most negligence claims against them.

What you should do:

The Role of Insurance in Protecting Landlords from Liability

One popular way that landlords protect themselves is by investing in General Liability (GL) policies. GL policies protect owners from safety issues that may occur on the premises. They cover the cost associated with potential damages awarded to tenants and the cost of defending yourself against the claim.

What level of coverage should you purchase?

Personal Injury Lawsuits vs. Landlords

A tenant will win a personal injury lawsuit against their landlord when they can prove:

  1. It was the landlord’s responsibility to repair the defect that caused the injury.
  2. The landlord was notified of the problem.
  3. Fixing the problem would not have been unreasonably difficult or expensive.
  4. The injury was the likely result of failing to fix the problem or the injury would not have occurred if the problem had been fixed.
  5. The tenant suffered legitimate injuries as a result of the accident.

If a tenant can prove all of these, or that the landlord should have known about the problem the tenant is entitled to recover:

If, as a result of the injuries, the tenant is left permanently disabled, damages can be awarded into the millions in favor of the plaintiff. If the injuries are caused to a child on the premises, and the result is a permanent developmental disability, you can find yourself in serious financial trouble, to say the least.

The truth is, most premises liability claims against landlords can be easily avoided by carefully inspecting the property before a new tenant moves in, ensuring that you respond to the tenant’s issues promptly, and covering your bases in terms of having the proper levels of insurance. Landlords who follow this simple advice will never have to worry about fighting a premises liability lawsuit.

How Title Insurance Works


How Title Insurance Works

Anytime you transfer property, you must consider the title insurance implications. Title Insurance will generally being validated upon the transfer of the property. However, title insurance isn't invalidated. If you transfer the property to a wholly owned LLC, that is an LLC that is completely owned by you, the person that also own the property, will also will invalidate it.

If you add your spouse to title for example, that'd be a transfer. But in that circumstance they're not going to invalidate. You also can transfer the property to an inter vivos trust where you are in the settler of that trust. This is the type of strategy that we'll be using with inside of our anonymity land trust and we start transferring properly.

My name is Scott Smith. I'm an asset protection attorney. I'm a real estate investor and I want to help. Click here to set up a consultation today!

Advantages of Having an LLC Over Insurance For Asset Protection

Advantages of Having an LLC Over Insurance For Asset Protection

Insurance will not protect you from most lawsuits that will happen regarding the transaction of your buying and selling of real estate. Every time that you're entering into a contract. Every time you actually sell a piece of property, every time you lease to a new tenant. These are all things insurance doesn't cover. Because of that, the only way for you to save your hard earned dollars is an asset protection strategy. That is the proper LLC and company structure.

Set up an asset protection consultation today!

Real Estate Investors Can't Just Rely On Insurance

Real Estate Investors Can't Just Rely On Insurance

[00:08] Insurance companies are basically a criminal business. Their whole business model is built around collecting premiums from you and denying coverage whenever it is that you asked for something that they should otherwise cup, and the reality of the situation is if you have a big claim, you end up having to sue the insurance company just to get them to pay out. I don't think as an investor, that is something I want to rely on when it comes to the big ticket items. Sure, they're going to cover the $5,000 slip and fall case that happened on your front porch because it was a little icy outside, but what they're not going to cover as grandma falling to this staircase, breaking your hip and now being permanently disabled for the rest of her life. Well, what then that case where they're going to say this, you should have known about the staircase. This is a case of gross negligence that's outside of your policy limits. You can sue us and spend thousands of dollars against our millions of dollars hoping that we'll actually end up paying anything out too.

[01:15] Okay.

[01:16] What you need to protect yourself to protect your assets as a proper asset protection strategy, incorporating and not a truss and LLCs to keep people from coming after your hard earned dollars. My name is Scott Royal Smith. I'm an asset protection attorney. I'm an a real estate investor myself and I'd like to help you

[01:43] if you thought this content was good, you have to go see the bigger pockets podcast that I did. It was the top 10 things every real estate investor has to know about asset protection, and you can go listen to it right here.

Investment Property Insurance Questions You Should Ask Your Agent

Real estate investors that do well are smart folks, but it can be hard for smart people to admit they aren't experts at everything. Many of us have successful careers outside of investing. Maybe you're a CPA or a neurosurgeon, or an attorney like myself. But smart people like ourselves need to be mindful that we are also wise. Wisdom is knowing that there are things you don't know.

And what do the wise among us do when we don't know something? We ask questions! Insurance is vital, and typically a legal requirement for your investment properties. Insurance alone is not an advisable strategy for asset protection purposes. At Royal Legal Solutions we highly recommend insuring your properties as your first line of defense.

Question 1:  What Types of Policies Are Available To Me?

Typically, you'll find policies along a spectrum of Basic, Broad, Specified, and Comprehensive. The first is exactly what it sounds like: the bare minimum. Comprehensive is the opposite end of the extreme, and the most all-inclusive kind of policy you can acquire. A good starting point is to write down what you have; i.e. assets, debts, dependents, monthly income, monthly expenses, and how you make a living. This way you can formulate a plan for what coverages you will need and work from there.

Question 2: Can You Please Explain My Policy And What It Covers?

This is fairly straightforward. You may also take this opportunity to ask what other types of investment property insurance the home already has (fire, etc.) to get the best idea of your needs.

There's a second part to this question: you will also want to ask what your policy does NOT cover. Some policies cover slip-and-fall accidents, and some don't. Many investors need this coverage, especially those who flip or rehab homes. Think about it: with all the contractors,  laborers, and both prospective and future tenants coming through the property, you can't risk not having your backside covered. Asking what isn't covered will help you make the most informed decision possible.

One major concern you should know about your policy is whether it covers the loss of rent. Landlords can face this in situations as extreme as natural disasters (just ask the landlords who had to rebuild after Hurricane Sandy) or as mundane as a few teenagers armed with spray paint defacing your property. (maybe also add about short-term rentals, where damage to the property or furnishings in the property cause a loss of revenue? Assess your risks alongside your agent, but remember insurance is cheap when you think in terms of loss so investors who can afford it should take advantage.

Question 3: What Information Do You Need For An Investment Property Insurance Quote?

This may seem obvious, but the details of your situation will help the agent get you the most appropriate and accurate quote for your needs. Here are some typical things you will have to provide:

Question 4: What Is My Property's True Replacement Cost?

TRC is different from the value of your home but critical for real estate insurance purposes. It's usually measured in square footage, and a good agent will work with you to determine your need. Feel free to shop around with various agents to ensure you're getting the best, honest deal. There are over 4000 different factors that go into determining the assessed value of a property.

Final Notes: The More You Know, The Better Off You'll Be

You want an agent who is both transparent and able to answer all of these questions. You can start by researching reputable agents online. If an agent won't answer these questions, that's a giant red flag. Move on.

Still stuck? We now have an in-house insurance agent on staff to assist real estate investors. Together we can streamline coverage through the policies we offer to ensure that you are protected and that your loved ones are cared for in the event something unforeseen occurs. We offer a single point of contact for all of your policies including auto insurance, property insurance, and life insurance. To get started, take our Insurance Quiz and book your free consultation. You've got nothing to lose in requesting a quote and everything to gain if we can save you money.

Asset Protection: Insurance or Something More?

When it comes to asset protection, insurance companies are basically a criminal business.

They collect premiums, then deny coverage when you need them to cover something they should cover. If you have a big claim, you'll have to sue the insurance company just to get them to pay.

As an investor, you shouldn't have to rely on insurance for asset protection. Sure, your policy will cover the slip and fall accident that happened on your rental property's front porch because it was a little icy outside.

But what about when your tenant falls through a staircase and ends up permanently disabled? All of a sudden the insurance company will say "this is a case of gross negligence outside of your policy. You can sue us and spend thousands of dollars against our millions of dollars and hope that someday, maybe, we'll eventually pay you something."

Good luck with that.

To protect your assets as a real estate investor, you need to understand asset protection basics, then you need to come up with a custom asset protection plan. You need to understand land trusts and limited liability.

LLCs Can Protect You From Issues That Insurance Refuses To Acknowledge

LLCs Can Protect You From Issues That Insurance Refuses to Acknowledge

[00:08] The truth is is there's a lot of that information when it comes to real estate investing and how to protect your assets, whether it's Joe Lucky, the keyboard warrior from an internet form or your CPA or the worst case scenario, a general practitioner that thinks he has a clue about what it means to be a real estate investor. If they tell you that all you needed shirt is insurance, they are wrong and Sherman's protects you from different types of claims than an LLC does. Let's take for example a case that I had a client a, it wasn't a slip and fall on her front porch. It wasn't that a, you know, somebody had a simple case of negligence and the management of the property. Well those would be things that insurance would cover and hurricanes is that she remodeled the house and she replaced the plumbing underneath the house.

[01:02] The buyers asked her in an email, what plumbing underneath the house did you replace? And her response was all of the plumbing in the house had been replaced. Come to find out three months later after the sale that there was a leak. In the plumbing resulting in tens of thousands of dollars to damage because the buyers at that point, we're out of town. Well, what do you think happened? Well, a loss of habit because the buyers were saying that your email was intentionally fraudulent. When you told us that all of the plumbing in the house had been replaced. This isn't a case of a seller who was intentionally misleading a buyer. This is a case that happens with almost all losses. It's a misunderstanding. You don't have to be a bad person to get sued. All you have to have is a misunderstanding. Luckily for my client, Jen, a proper asset protection strategy in place with a series of little seat that allowed us to negotiate the very advantageous resolution to the case. In fact, that particular case, we were able to get completely drunk. My name is Scott Smith. I'm an asset protection attorney specializing in real estate company structures. I protect my clients and make them judgment and I'd like to help.

[02:32] If you thought this content was good, you have to go see the bigger pockets podcast that I did. It was the top 10 things every real estate investor has to know about asset protection, and you can go listen to it right here.

Maintain Title insurance During a Property Transfer

Maintain Title insurance During a Property Transfer

Any time you transfer property you must consider the title insurance implications. Title insurance will generally be invalidated upon the transfer of the property. However, title insurance isn't invalidated if you transfer the property to a wholly owned LLC. That is, an LLC that's completely owned by you, the person that also owned the property. You also won't invalidate it if you add your spouse to title, for example. That'd be a transfer, but in that circumstance they're not going to invalidate it. You also can transfer the property to an intervivos trust where you are the settlor of that trust. This is the type of strategy that we'll be using with, inside of our anonymity land trusts when we start transferring property. My name is Scott Smith. I'm an asset protection attorney, I'm a real estate investor and I wanna help you.

How To Maintain Title Insurance During a Property Transfer

Your Insurance Company Won't Help You Protect Your Assets

We’ve been trained to believe insurance companies are there to watch our back. The reality is that your insurance provider is a company, just like Nike or McDonalds. They exist because they make more money than they spend.

These insurance companies are more than happy to take your money as long as things are going well. You would never have any reason to doubt their protection until you decide to file a claim...and get dropped! 

Have you ever noticed how people start suing insurance companies every time a natural disaster happens? Why do you think that is?

Now of course, you should have insurance and you should file claims. This is going to work out fine most of the time. But the reality of the situation is that when you file a big claim, they are going to take a second look and see if they can wiggle out of their responsibility to cover you (see our landlord FAQ article for more on this).

You may just find yourself suing your insurance company like the folks after disasters.

Your Insurance Company Won't Protect Your Assets

While everything's fine, your insurance company will take your money. Yet as soon as something happens and you decide to file a claim, you get dropped. The reality of the situation is, if you have a big claim you'll end up having to sue your insurance company just to get them to pay out.

As an investor you shouldn't rely on filing a claim with your insurance company to protect your assets. Sure, they're possibly going to cover the $5,000 slip and fall case that happened on your icy front porch.

But what they won't cover is where the real story is here. Here's an example of a claim that only an asset protection plan will help. Imagine telling your insurance company that grandma fell through the staircase, broke her hip, and now will be permanently disabled for the rest of her life. You'd almost certainly be unceremoniously dropped.

Don't expect their empathy, either. Instead, they're going to say it was your fault grandma fell through the staircase because you should've known there was something wrong. They'll say your claim is a case of "gross negligence", which is your fault and thus outside of your policy limits.

Your insurance company knows they can do this. The fact is, they have millions of dollars to spend on their legal team, whereas most investors only have a few thousand dollars to spend on ONE attorney.

Protect Your Assets By Being Proactive

Instead of relying on your insurance company to protect your assets, be proactive. You worked hard to get to where you are now, don't lose what you've built.

What you need to do is protect your assets with a proper asset protection strategy, incorporating anonymous trusts and LLCs/Series LLCs to keep people from coming after your money. These legal structures will stop lawsuits before they happen.

Asset protection involves making your ownership anonymous, as well as legally limiting your liability. People won't sue you if they think you have nothing worth taking. They certainly won't be able to sue you if they don't know what you own. Doesn't that sound a lot better than filing a claim? Learn more about basic asset protection strategy from the many articles here on the Royal Legal Solutions website.

If you have any questions, just comment below and I'll answer them as soon as I can. If you're not willing to risk everything you've earned on the futile hope that insurance will protect you, schedule your asset protection consultation today.

Can Title Insurance Be Transferred? How To Preserve Title Insurance When Transferring Property

Are you in the process of transferring property? Or maybe you're planning to transfer a property, or even multiple properties in the near future. If the answer is no, let’s just hypothetically say you’re looking to transfer your properties into a legal structure as part of your new asset protection plan. Can title insurance be transferred?

Ultimately, this is something most real estate investors will have to deal with at some point in their investing careers. Get this information now so you can stay on top of your business and be prepared when the time comes.

Let's talk about how to preserve your title insurance when transferring, step-by-step.

How Title Insurance Works

Any time you transfer property, you must consider the title insurance implications. Title insurance will generally being invalidated upon the transfer of the property. However, title insurance isn't invalidated if you transfer the property to a wholly owned LLC (an LLC that is completely owned by you, the person that also owns the property).

It also won't invalidate it if you add your spouse to title.

You may also transfer the property to an inter vivos trust where you are the settlor of that trust. This is the type of strategy that we'll be using with our anonymity land trust and we start transferring property.

Property Transfers and Title Insurance

As a real estate investor, you’re painfully aware of the cost of insurance for a property. The last thing you want to do is pay more money than is absolutely necessary for insurance.

Usually when you transfer a property, your hazard and title insurance expire. This typically happens because insurance companies are pretty good at looking out for their own best interests, and have the legal personnel to make sure these stipulations are made in your insurance contract. I know nobody enjoys reading contracts, but go ahead and check if you don't believe me. The vast majority of the time, property transfer means expiration for those types of insurance.

Preserve Title Insurance With a Land Trust

But never fear, smart investor friends: there is a way around this!  You can use the oh-so-useful money-saving and anonymity-preserving land trust, a tool I've written about before here on Bigger Pockets, to preserve your title insurance as well. Here's how it works:  if you transfer your properties into a land trust you’ll be able to preserve both your hazard and title insurance. This in addition any other insurances you might have for the property.

Land trusts are a common component of many asset protection plans because of their ability to give you total anonymity. And as a small bonus, you won’t have to worry about violating the due on sale clause when you transfer your property to a trust. Follow the link in the previous paragraph for much, much more information on these other uses of the land trust.

You might be thinking it sounds too good to be true. The skeptical among you may already be wondering what kind of legal backbends you'll have to do, and if there's a catch here.

Is It Shady To Use a Land Trust? What's the Catch?

Not at all. This is perfectly legal and honest tool, and something that investors can always take advantage of. If you're holding your breath waiting for a surprise gut-punch in the fine print, exhale. You aren't going to find it.

That said, you do need to have your ducks in a row regarding both the property and the trust. First, you must be the settlor of the property you’re transferring to preserve your insurance. You must also be the beneficiary of the trust you’re transferring the property in question into.

Before transferring any property, it's definitely a good idea to review any insurance policy you have. While you're doing this, pay special attention to your title insurance policy. It shouldn’t be too hard to find the part of your insurance contract dealing with this issue. If you're having issues with this, consult with an attorney. A business-savvy professional who deals with contracts regularly, such as an insurance agent, CPA, or other legal professional can also help in a pinch.

Usually, the land trust you want to transfer property to must meet your insurance policy’s criteria for transfer eligibility.  If you’ve looked over the policy and you're still uncertain whether this is the case for you, it's time to check with your agent.

Land Trusts Preserve Title Insurance and Protect Your Assets

The good news is there’s a guaranteed way to make this transfer will work for you.

The most reliable method is fairly straightforward. All you need to do is add the land trust you plan to use as the beneficiary of your insurance policies. Adding your land trust as a beneficiary essentially guarantees that you'll get to keep your insurance.

This method is leaps and bounds better for you than getting a new insurance policy. Why, you ask? Because, as I’m sure you know, a new insurance policy would have to use the current value of the property. And thanks to a little thing called appreciation, which is usually a good thing for investors, the current value is almost certainly higher than it was when you bought it. And while that's good news if you plan to sell it, it's bad news if you're having to get a new insurance policy. It means you’d actually end up having to pay more, perhaps a lot more,  than before. So you want to hold your policy to the last minute before being forced to renew.

First you’d have to pay to re-issue the policy, and since your property has probably appreciated in value, your policy will be more expensive. Second, if you're policy isn't already near its expiration date, you're unnecessarily costing yourself extra money. Extra money which could be used for much more pleasant things than insurance. This is why it's worth the effort to use the land trust method to avoid triggering the expiration clause in that crafty insurance contract.