#98 - The Right Coverage: Property Insurance Strategies with Valerie Cusano

[00:00:00] Welcome back to Passive Income Pilots, everyone. Tait Duryea here with Ryan Gibson. What's happening in Seattle, Ryan? Oh, you know, the weather has been a little gloomy and rainy and overcast, but I got to spend the holiday in Florida. So I'm excited to have that break and come back. And that's good.

[00:00:17] That's great. Well, the weather has been fantastic in Hawaii. I tell you what, we've had a really nice fall. We had kind of a rainy summer this year. So this fall has been just quintessentially beautiful, but looking forward to getting some time on the mainland this weekend, heading up to Napa Valley and actually looking forward to getting some turns in on the slopes this season, not on this weekend, but eventually. So we got to do some skiing up in Seattle sometime.

[00:00:45] Heck yeah. We're going to be going later on here. So come on up anytime. Sounds good. We'll look for a powder day. Yeah. If you're in town, you're in Seattle, look me up. We'll go hit the slopes. I'd love to do that with our listeners and those that work with us. So, well, our guest for today is also dealing with some snowy weather. We have Val Cusano on the show who has been in the insurance industry for decades.

[00:01:09] Val lives between Calgary and Honorable Hawaii. And we had the pleasure of meeting at a board meeting at the luxury condo building that I live in. And she is unbelievably knowledgeable when it comes to insurance, which is a pain point for a lot of us that own rental properties, own a lot of properties all over the place.

[00:01:31] And I just said, hey, you've got to come on the podcast and educate us on some of this. So she has her own agency. She's had her own agency for the last eight years called Palm Insurance. Does a lot of oil and gas insurance. So she's more on the commercial side, but understands the personal lines and the real estate lines very well. So I'm excited to get into that.

[00:01:53] The other thing that we go into on this episode as well that I like is, have you ever really thought about buying a condo? What are the ups? What are the downs in that? What are the, you know, everybody always kind of talks negatively about condo ownership. We talk about some of the bright spots and then we go into how you would actually evaluate a condo to buy as a rental property. Yes.

[00:02:12] And what things you would look out for and what questions you could ask in order to determine if the condo is worthy to invest in. So, you know, we cover a wide range of topics ranging from insurance to condo to investment property, the highs and lows of that. So it's a, it's a pretty action packed episode and I think you'll get a lot out of it. Agreed. Let's get to it. Welcome to Passive Income Pilots, where pilots upgrade their money.

[00:02:40] This is the definitive source for personal finance and investment tactics for aviators. We interview world-renowned experts and share these lessons with the flying community. So if you're ready for practical knowledge and insights, let's roll. Val, thank you so much for coming on. More than welcome. Happy to be here. Well, we gave a little bit of intro in the intro, but Val, would you give the listeners just a little bit of background on yourself, how you got into insurance and how we got here?

[00:03:08] Sure. Like many people, insurance was more of an accidental fit for me. I really started as a lawyer. I graduated law school from Vancouver in British Columbia and I started practicing law and I sort of gravitated towards insurance defense law. And having done that, I wanted to slow down a bit and moved into the world of insurance brokering. I worked for one of the largest brokers, which is Marsh, which is kind of where everyone cuts their teeth when they get into insurance.

[00:03:36] And then was approached by a bunch of guys that were Lloyd's of London brokers and they wanted a Canadian business set up. So they gave me the capital to create my own insurance brokerage. And really, I was focused not really on so much personal insurance. I was focused really on commercial energy, oil and gas insurance, which in Calgary during those days was booming. Still is, notwithstanding what our prime minister likes to think. We are very much centered on oil and gas in Canada.

[00:04:05] So from there, I grew my brokerage, sold my brokerage. And now I own a managing general agency, which is an insurance company with Lloyd's cover holder status. So I use Lloyd's capacity to help companies buy insurance here. I also am a condo owner, which is more relevant to this discussion. I own a condo in Oahu in Hawaii, and I own a condo in Calgary, Alberta in Canada. And I split my time between those two places.

[00:04:30] So I have had to become very familiar with condo insurance and its challenges. Val, I'm an airline pilot and I'm flying the line. What's the so what on insurance? If I'm going to buy a rental property, what what are the things that I have to know about? What are the things I look for? OK, so basically any building that you buy insurance for, you are responsible typically to buy insurance for your own contents and your own improvements.

[00:04:57] So the building as a whole will typically have a board and an association. That association will be responsible for buying insurance that protects the property that is common property. That's really the simplest way of looking at it. So the common areas that you use, the elevators, the lobby, all of those parts of the building will be covered under the association condo policy, which the board has the responsibility to purchase.

[00:05:22] That insurance is important because you will pay for that insurance through your association fees. So you are actually indirectly purchasing the common condo insurance already. But that insurance policy is not enough. You will be required typically under the bylaws of that condo building to purchase your own tenant insurance.

[00:05:43] And that tenant package then will cover the improvements you make to your own condo, the private space that you enjoy in your own condo and the contents of your condo, as well as liability. So if you had somebody in your specific condo that got hurt and sued you, then you would be responsible under your liability insurance for that. So that is another component of your tenant package that you would be purchasing. So those are the two types of insurance you're going to be looking at for any condo.

[00:06:12] And you want to make sure that they are tailored to meet each other so that the deductibles coincide and you don't have too much coverage, but you also have sufficient amount of coverage. So that's sort of the basic package that you're looking for. How does that differ from homeowners insurance for a house, a single family home? Right. So good question. So when you buy your own home insurance policy, you're covering your entire home. So you're covering the entire structure of your home in the event of a partial or a total loss.

[00:06:42] So you're ensuring the building itself and the need to rebuild. If you were, say, fully damaged with a fire or a flood, you would then have to rebuild the structure itself. And you would be covered for all of the inside finishings, as well as all of the contents, as well as liability anytime someone entered onto your property and suffered any kind of bodily injury or property damage.

[00:07:04] So you buy essentially one policy as a homeowner that does all of the things that the two policies that you have to be aware of in a condo situation. So you're essentially buying one policy instead of having to buy the two. Got it. And if I understand correctly, you're still paying for both of them in a condo building. It's just that one is absorbed by your HOA fee and you don't really have direct control over it. The board is going to choose that.

[00:07:29] But you need to understand what is contained in that policy so that you can make an informed decision on what you're buying for your specific unit. Correct. Your association fees will always include the cost of the property policy. And when the market hardens and the rates go up, you will see that reflected in an increase in your HOA, your association fees.

[00:07:50] So it is important to be aware if you want to be more involved in purchasing that policy, you can always join the board or ask for the board to give you the relevant details. The board should as well be communicating every year about the renewal and the status of the renewal of the policy, as well as the requirements that you as a condo owner have when you're purchasing your own tenant package.

[00:08:17] Because there will be specific requirements that they demand that you have. And so you should be wary and look at the letters that they send you very carefully when you're buying your own insurance. Makes a lot of sense. You know, we're talking about condos and buying and getting insured on a condo. What are some of the like red flags about condos investing in general? I know that this is, you know, you're kind of in the insurance side of it, but maybe from an insurance perspective, what are some red flags that you see?

[00:08:43] Because I feel like whenever I buy into a condo, it's almost like you're going into this wide world of like, you know, there could be lawsuits. There could be insurance claims. There's not enough insurance. There's not enough money. There's reassessments. What are some things that you see? Yeah, that's a big issue for sure. And really, you can look at it two different ways. When you buy a condo in a new building, there are specific issues that you should be aware of.

[00:09:07] And those are, if it's a new building, are there construction defects that are now hampering the building? Are there construction defects that have resulted in potentially a lawsuit or a mediation that involves the building as well as the owner and the contractor of the building? So a new building, you would think when you typically buy a condo, oh, great. This is a new building. I'm not going to have to deal with corroded old pipes.

[00:09:36] I'm not going to have to deal with some of the issues that plague old buildings. But there are many, many common issues for new builds as well. And so when you purchase your condo, you should really be asking the questions, which are, are there any lawsuits right now that are in place because of the building construction phase and any construction defects that have manifested since the building was complete? So that's, that's a big red flag to look for. There should be disclosure about those items when you buy a condo.

[00:10:06] There will not be necessarily a very fine detail level of disclosure, but you will at least have enough information that you can say, okay, I need to dig a little deeper. When I was buying my condo, for example, in Hawaii, I was aware there were construction defect claims. And I asked for the name of the lawyer who was handling the litigation on behalf of the building to talk to him directly, which I did. Not everybody is going to understand that that is something that you should do. So that is one of the mechanisms that you can use. Typically, your first go-to will be the realtor who you're working with.

[00:10:36] And the realtor should have that information as well. But if you want a higher level of detail, then you should be allowed to speak to the lawyers that are involved, the board, president, let's say, all of the people that will have more information than you do. You should be able to be free to seek advice from that. When you're talking about older buildings, you have similar problems, but they're not construction defect claims by then. They really are age of building issues.

[00:11:02] So if you're talking about Hawaii, where we're familiar with a lot of the issues with new buildings, a lot of older buildings are struggling similarly with many issues. The weather in Hawaii is lovely, but it's humid and there's lots of saltwater. And so you get corrosion and you get just natural wear and tear of all of the various parts of the building that are so important to the functionality of that building. And you could be going merrily along your way, paying fairly low association fees.

[00:11:31] And then there could be a massive jump in those association fees because all of a sudden an assessment has revealed that we need to replace all of the piping. That's common to the building. And that's going to be a really big impact. Maybe you haven't had reserving properly over the years so that you don't have the pot of money necessary to pay for that pipe replacement project. So therefore, you're going to have an increase in your association fees.

[00:11:55] So there should be you should be monitoring very closely when you do buy a condo old or new what the reserve process has been in the past so that you have built up reserves for these unexpected or to be expected issues that will emerge so that there's not a nasty surprise and your fees don't double or triple in a year. Or because these events that are now having to be fixed have not been addressed and planned for in past years.

[00:12:22] Yeah, you know, you always hear the negatives about condo ownership. Can you talk to the positives? Right. Because, I mean, people live in condos and have great experiences and there's there's bad experiences. You get the same in a house, too. Right. Or apartment. Right. Any kind of property. Yeah. What are some upsides? What are the what are the synergies I'm getting out of condo ownership? Yeah, that's a great question.

[00:12:42] I mean, I was a homeowner for years until my children went to university and I was living in a giant home on a double lot in Canada and I was paying a thousand dollars a month just to get my my sidewalks shoveled. In Canada, we have serious snow. And if you don't shovel your sidewalks after a snowfall and someone slips, that's on you. So this is a super big issue that we have. If a strong wind came and blew my chimney cap off, I had to hire someone to do that.

[00:13:09] If my hot water heater stopped working, I had to hire someone to come in and fix that. If you have bugs, you have to hire a pest control company. So when you think about the cost that you pay in association fees, that's one of the first questions people ask. What are the association fees? Well, the association fees will sound high in many cases.

[00:13:27] But when you actually break it down, that association fee typically will cover almost everything that you need to contemplate from a maintenance perspective and insurance perspective and all of these other things that you're paying individually when you're a homeowner. So if you added up your utility bills, your maintenance bills, your snow shoveling, your water for your lawn, all of these other maintenance costs that you would have to pay individually, those are all wrapped up into your association fee.

[00:13:56] So that's one of the advantages really of owning a condo is you can understand those fees. They will change over time, but they're manageable and they encompass most of the costs associated with your condo. Of even more importance, I think, is some of the peace of mind that comes from knowing that you have somebody to call immediately if there is an issue. So, you know, for example, water issues are very common in condo buildings. They can start from all sorts of things. Sinks can overrun.

[00:14:26] Pipes can corrode. You may well be sitting, having a lovely night, drinking a glass of wine and watching TV, and you could have a nice new rainfall that comes out of your ceiling. And if it's Sunday night at 10 o'clock and you're an individual homeowner, you still need to fix the problem and you're probably going to have a hard time finding somebody to come at that point.

[00:14:45] If you're in a well-run condo with a good management team, the minute that occurs, you can pick up the phone and get people into your condo to at least start doing the remediation and figuring out where the water is coming from immediately. And you have a whole support team really around you that is going to walk you through the process and really assist you, particularly our building at Anahaw. Sadly, we've had a lot of experience with water claims. But what it means is if you have one, we have a system.

[00:15:15] I mean, I did have one recently in my bathroom and I had the team into my condo. I wasn't even there at the time. They set up fans. They prevented mold from forming. They got the trades people in that needed to be in. And the whole thing was fixed in a week and a half. That would be an unusual time frame to have a similar problem fixed in a single property home. So there are some there are some major advantages. You're also part of a community.

[00:15:41] I mean, if you don't like people and you don't want to meet people and be part of a community, you should probably live in a home out on an acreage by yourself and be quite happy with your wildlife and your life there. But a condo, if you're new to a neighborhood or, you know, you're moving into Hawaii and you want to meet some people and you want to play tennis and you want to then then the condo should have a really good community opportunity for you.

[00:16:04] You don't have to participate in everything, but there certainly is a common goal, which is to make that building a home for everybody that lives in it. And so, you know, that's one of the things we should talk about as well, because it's hard to put a price on that, really. Yeah. And it's so hard when you're looking at rental properties to understand if you're buying into a great community or if you have that really good management team.

[00:16:26] And if I'm an airline pilot and I'm trying to buy a rental property in a good community or buying a condo in a good community for the purposes of renting it out or just having it be my place where I hang my hat on my days off. It's hard to to pick apart what makes you know what what questions do you ask? How do you know how do you evaluate that property? Can you talk about some questions you would ask and who who who would you ask? Like, how would you go about doing your due diligence on that?

[00:16:53] Yeah, that's such a good question, because typically you're only dealing with a realtor and the realtor is always going to tell you that it's a great property and has no problems and everybody's wonderful. And if you stop at that, then you might have a very nasty surprise once you've moved in. And that is a huge issue. I completely agree with you. So what I would recommend and what I know our building offers is to say, hey, this building seems really nice, but I'd like to talk to some people that actually live there. Can you give me the names of some of the board members? I can start there.

[00:17:22] Can you give me the names? Can you tell me about some of the some of the committees that they have? And, you know, our board, our board chairman. I'm on the board of our building in Oahu and my husband's the chairman of the board of our building in Calgary. So we tend to be very involved when we get into a building. But we're happy. Anyone in our building is happy to talk to a prospective owner. So so I think the best question you can ask is, can you please give me the name and number of the chairman of the board? And I'd like to start with him.

[00:17:52] And from him, then I can get more names and talk to other people. And you can do your due diligence that way and go have a coffee. You know, go sit down and say, hey, I'd love to meet some of the people in the building. I'm really serious about getting a condo, but I want to know what it's really like. Can I can I buy you a coffee? And certainly in our building, people are very happy to do so. So I think that's a good starting point there. That's so great. Yeah, that's good. Zooming back out, can we talk about the state of the insurance industry? I want to bring the conversation back to insurance here.

[00:18:20] You have been in the insurance industry for a long time. It seems like, you know, rates are going through the roof. Hurricanes and floods are becoming more more prevalent. What's happening here? Are we at the beginning of just an infinite climb in interest rates? Do you think they're plateauing? Can you talk about the interconnectedness between what happens in Florida versus what happens in Hawaii versus what happens in Canada? Because it's a it's global business, right? So give us the 30,000 foot view.

[00:18:48] So basically, when you buy your own insurance policy, whether it's car insurance or home insurance, you think you're getting it from a specific company and you are on the face of it. So let's just use a simple example. I buy my condo insurance from Chubb Insurance. And Chubb Insurance then is who I think my insurance company is. But behind the scenes, Chubb Insurance is buying a very robust package of reinsurance. And that means basically that Chubb is acting just like me.

[00:19:15] And they're saying, hey, I've now taken on, you know, I'm insuring 800 condos in Oahu. I can't pay 800 claims if there's this big disaster. That'll ruin my bottom line for this year. My balance sheet will be atrocious. I need to reinsure. So they're now going to go to Lloyd's of London or Swiss Re or Munich Re, some of the big reinsurers that are out there. And they're going to say, hey, guys, I'm insuring a big package in Oahu. Can you reinsure me?

[00:19:41] And that might mean that if I have a claim, let's say my claim is a million dollars. Chubb may only be paying $100,000 of that. And the reinsurance policy that they've purchased will be paying $900,000 of it. So it's a really important part of the whole insurance market is reinsurance. So let's say Chubb reinsures to Lloyd's of London. Lloyd's of London is then reinsuring up again, maybe to a Swiss Re or Munich Re. And then they're reinsuring again.

[00:20:09] We call that seating, seating insurance. And it'll go layers and layers and layers. And ultimately, the rates that you get charged by your insurer are essentially dictated by the reinsurers that sit at the top of the food chain. There's about six of them that really are the important ones that reinsure most of the insurance in the world. They're based in Europe. Their nickname is the Alpine Mafia because they have that much control over the insurance market.

[00:20:39] There is a meeting that occurs in January in Monte Carlo every year where all of the all of the treaties, the reinsurance treaties, what they're going to reinsure, how much they're going to reinsure and what the rates are going to look like, that all gets set in Monte Carlo in January. So when you think you're going to do a great job getting your insurance rates with Chubb down, you may have some room there to do that. But ultimately, Chubb is charging you on the basis of what they're paying to all of the reinsurers that they have to work with.

[00:21:08] So if you think about the insurance world as a global marketplace and you think, oh, Florida has had some brutal hurricanes in the last couple of years, they get wiped out frequently. We know it's going to continue to happen. Atlantic named windstorm is a huge risk and people are getting pummeled. But I live in Hawaii. I don't have as big of a risk. Why am I having to pay more? It's because the reinsurers are having to make money somewhere.

[00:21:35] When one book of business, say in Florida, is hurting them, they're going to make money on their other books that aren't hurting them. Those rates, somehow the insurance companies have to make money. When there's a strong investment market and they're making money on investments, they're not as worried about money they're losing on insurance. But when they're losing money on investments and losing money on insurance, then we're all going to pay. And so it's a really complicated and intertwined market with the investment and the insurance component.

[00:22:05] And all we can do is be aware of the market factors, be aware of what's happening in our environment and try to place our risks in the best light possible. So, for example, when we took our building out to renewal this year, I worked with our broker who has access to all of the insurance markets. I also have access to some of the insurance markets. I said to him, let's put together the best insurance submission that we can have and let's show

[00:22:33] that we're better than all of the other buildings in our neighborhood. Because we're already going to be in a bandwidth of insurance costs to begin with just by virtue of where we are. But let's be the best in that location so that we can get the best results. So we put together a package of why our building has learned lessons from past claims. And we're going to prevent those similar claims from happening going forward. And we got a great renewal as a result. But you have to put a lot of work into it because you're still, you know, you're fighting

[00:23:03] against all the other guys that are trying to buy the same kind of insurance as you. And so it's like a hard tennis match. You know, you want to emerge victorious. You've got to be the best guy. You've got to be the most prepared. And that's really how the global insurance market works. There's limited capacity. If you want your piece of it, you've got to get out there and get it and sell a really good story. This is interesting because it sounds like you're building. By the way, I want to move into your building. Sounds amazing. We'd love to have you. It sounds like you guys have a great, pretty nice, a great, a great team and a great community

[00:23:32] and best practices. And usually when you have something like that, there's maybe like an association for condo associations, if that makes sense. Like Airline Pilots Association, ELPA represents the pilots. Is there like an industry that helps condo associations shape boards and adjust best practices for insurance or does that association not exist? I feel like DC has every association you can imagine, but. There is an association. I mean, there are seminars that I get invited to all the time.

[00:24:02] Be the best board member you can be for a condo building. And I've gone to some of them. Most of them don't really focus on insurance, I would say. And I think it's hard. Our board in Hawaii, we know we've had insurance struggles, but I don't think we really understood what to do about it until I joined the board. I'm not saying I'm the savior of all things. It's just that I think I brought a different focus to it. In Calgary, we just renewed our insurance here. And we live on a river and we've had lots of floods.

[00:24:32] And we have a great building, though, that is quite resistant to flood. And we just got our renewal terms and we had a $3 million sublimit for flood. And I told the broker that's unacceptable, remove that. But if I hadn't had the meeting with the broker and told him to remove the $3 million sublimit, I'd still have it. We got it removed and we got a reduction in price. So I think the moral of the story is, yes, there are groups that try to help you understand.

[00:24:59] But at the end of the day, you have to be your own advocate and you have to have direct face-to-face conversations with brokers and sometimes even with the insurance markets themselves to really get the best result. So I'd like to say there's a lot of support. I'm not quite sure it's as developed as it could be or should be. This is so interesting. So we're talking really high level, which I love the Alpine Mafia that meets in Monte Carlo. That's insane. I had no idea about that. But we're also talking street level here in terms of like, okay, I own a condo. I'm an airline pilot. I own a condo.

[00:25:29] And let's say I'm going to join the board. Very briefly, what things can I do or who can I tap to ensure that we're getting the best insurance rates possible on that building? Good question. So when I joined our board, I said, can you please show me what the broker did last year leading up to the renewal? I want to see everything. Because typically what you put forward into the market when you're coming up to an insurance renewal is called a submission.

[00:25:54] And that submission may be thick and plentiful and full of good information, or it may be non-existent. It varies tremendously. And there is typically a broker involved. So there are insurance markets that give you your insurance. There's you that's buying the insurance. In the middle is an insurance broker. And the reason you use an insurance broker is because they're supposed to be the experts and they have access to all the markets. So instead of you going, I really like the sound of the word chubb. I'm going to go with chubb this year.

[00:26:24] Probably not the best way to decide how to buy insurance. The best way to go is to say to your broker, hey, you know my building. You tell me all the markets I have to choose from and then tell me how to tailor my coverage. So what I did is I went and met with our broker when I started on our board and I said, tell me why we have this deductible. Tell me why we pay this much. Tell me what we can do better next year. And tell me all the markets you spoke to at the last renewal because I think you're missing some.

[00:26:51] Now, I understand the process a little bit better than some people do, but those same questions will elicit the same answers, which are, hey, I think we should be doing more. And I think we can get started more quickly. In the old days, we used to get our insurance renewal terms two days before we have to bind them, two days before the policy is expiring. Well, that's that's ridiculous because we don't have any time to ask questions and tweak the terms. So what we implemented this year is that we wanted the terms to come within a month.

[00:27:21] We wanted the initial renewal terms within a month. And you were able to dictate that to the broker? 100%. Otherwise, I was going to choose a different broker. I mean, there are lots of brokers out there. Brokers are fighting for business. They know that you have options. So you just say to them, look, I want to work with you and I would like to be loyal to you, but you've got to you've got to step up to the plate and give me what I need. Otherwise, I have other broker. I mean, I have other brokers calling all the time just because I'm a board member saying I'd do a better job. Bring your business to me this year.

[00:27:50] So you can keep your broker pretty sharp and tuned in and you can dictate to them. What you need because they're in competition. It's just like any other business. So I think just just like realtors, there are there are good realtors who are really good at what they do and are going to get you, you know, a better place at a better price and and walk into it eyes wide open and make sure that you're not making a big mistake on a giant purchase. And there's other realtors who have no clue what they're doing. It's a part time gig for them.

[00:28:19] I think it's the most bifurcated industry in the world. My mother and my wife are both realtors. And, you know, the number of realtors who have no clue what they're doing is shocking. But there's also ones who are incredible. It sounds like the same thing could be true. I'm not sure because I'm not I don't know insurance could be true in the insurance world. How do you know when you're talking to a broker? What are what are some telltale signs when you get that broker that says, hey, I can do a better job, bring your business to me?

[00:28:47] What are some some things that would tell you, hey, this person's really good at what they do? So I typically will ask them to tell me about the other condos that they write. So if I have a broker come to me and say, I know your neighborhood really well, I can do a good job. I will say my first question will probably be what other buildings are you are you doing insurance for? If you're so knowledgeable in our neighborhood, show it to me. And then I will actually say, great, I'm going to call the chairman of Wai'ea and

[00:29:14] I'm going to ask him if he likes you, because brokers usually will give you references. They will tell you other buildings that they write and they will show you their history of how much time they've spent in the market. There are two different groups of brokers. There's usually the big, big ones that are multinational, international brokers. And then there are the more independent, smaller ones.

[00:29:39] I tend to gravitate towards the independent ones that are located in your area and are really specifically focused on your market because they will think of you as a bigger client than the national guys who you're just another fish in a very big pond. When you say independent, what do you mean by that? So, uh, I would say independence would be a guy or a bunch of guys or women that decided to start up a brokerage in Hawaii.

[00:30:09] Let's say they're based in Honolulu. They are a truly local brokerage. They are not, they have not been bought yet by a Marsh or an Aeon or one of the big guys. They truly are a local brokerage, um, like a family owned mom and pop almost, but they, they have to have some size to them to be able to access the markets that we need to write our insurance. But independence would be that they actually own their own brokerage. So they, you know, they eat what they kill.

[00:30:39] And so they're really motivated to do a good job and to know that market. So that's the difference between an independent versus one of the large guys who's just, again, a shareholder in this huge international corporation. Makes sense. So Val, we talk a lot on the show about what questions you should ask a broker and, okay, they should have great references and they should have ownership of other buildings, but what would constitute great responses from that broker?

[00:31:08] Like, okay, so you call that other building owner and what, what, what's that conversation feel like where you go, okay, this is good. Cause we might call that Gallagher and they might just say, yeah, he's great. You know? And, but what, what, what are you really trying to find? What constitutes a great answer? Okay. So what I would say is how well do you know your broker? How often do you talk to them? Do they phone you a week before renewal and tell you your potential results? Or do you have a strategy?

[00:31:37] Did they come to your building and present a strategy? Did they ask you for input? Did they ask your management team for your best practices and changes that you've made to your maintenance policies in the last year? Do they, do they ask you questions about claims and why a claim happened? Do they show you the submission in advance of sending it out to the market? You can, I mean, I could do 20 questions of what you ask, but, but really the essence of

[00:32:04] it is, how involved is the broker in your business? Are they meeting with you on a regular basis to understand and educate you about the market and the market changes? Are they strategizing together with you and your management team to put forward the best submission that you could have? Or do they call you once a year saying, here's your results. Hope you like them. You know, it's a big difference.

[00:32:29] And there are brokers that will just do that turnover year over year over year, and they'll give you what they think you want. And that will be the end of the conversation. That is not optimal by any stretch. And so there should be discussions ongoing. We renew our building in Hawaii in August. I have discussions with our broker at least once a month, if not more, on trends, articles I'm seeing. What's happening? I've heard about this big loss at that building down the street. Tell me about it.

[00:32:59] That you want to be very familiar with your broker and you want to have them as a source of information. If I heard of a really bad claim in another building in our neighborhood, if I phoned my broker and said, tell me about that claim and he didn't know about it, I'd think, wow, you're not really in touch with this community then. You're supposed to know all of this. This is why I'm coming to you. So these are the questions that I would ask is that relationship. I want to understand how deep the relationship is between the building and the broker.

[00:33:29] You go to a new market. You're buying an investment condo in a ski town or a small ski town and the association doesn't really know up from down in terms of insurance. How do you start? Where would you start to go and solicit phone numbers for brokers in that situation? And so you're speaking about an individual who's buying one condo. So let's just say, yeah, you're an airline pilot. You're like, hey, I want to ski condo in Breckenridge, right?

[00:33:59] Right, right, right. But I don't know anything about Breckenridge. I just like skiing there. And now that I own the condo, I want to get my arms wrapped around how is this building being managed from an insurance perspective? What would you do to start finding good brokers in that market? Yeah, so that's a good question. There's a few different places to start. First, I would ask the chairman of the board who the broker is to give me one name to start with. But then I would go online because there are broker associations.

[00:34:29] Certainly in Canada, we have a broker association in every province and in every city. Brokers are licensed. And in the U.S., it's similar. So brokers must obtain a license. And that is through typically, well, in Alberta, it's our superintendent of insurance, but it's something similar in every province and in every state. And that government body, whoever licenses brokers, will also provide you with a list of brokers.

[00:34:54] And from that list, you can narrow it down because they typically will also share with you what their areas of expertise are. So it's not like going into the old style phone book. It is a nice way to see who the brokers are. They will typically then on their websites have testimonials. Most brokerages, if you look them up, they usually have very robust websites and they will have all of their areas of business where they practice.

[00:35:22] And they will have testimonials, at least a good broker will have testimonials from other clients that have used them. And so you can feel free to call as many of those brokers as you want to and say, give me some references. I want to understand how well you know this market. And so there is a very robust broker association anywhere you're going to buy a condo that you can access. And then you can also just start asking other owners once you, you know, become somewhat familiar with who the brokers are.

[00:35:52] Maybe there will be five or six that are popular in the space. And then you can just start to talk to talking to some of their clients. Got it. I want to make this more applicable to folks that maybe aren't interested in condos or don't own any and they own their own single family home. Let's talk about how a broker relates to them because we were talking before the show about the difference between just saying, you know, you're working with some insurance agent at

[00:36:15] State Farm because your brother sent them his number and you've been working with him for years. What's the difference between that and working with a real insurance broker in order to provide these policies for you? So it's a huge difference. So bottom line is there's really no value to your insurance policy unless you have a claim. Yeah, you're mandated to buy insurance. And of course, it's a smart thing to do. But until you have a claim, it can be very difficult to see if you're with the right broker and you don't want to wait that long.

[00:36:45] So as an example, my house flooded in a huge flood we had in Calgary in 2013. And my broker was Marsh just because I'd worked there years ago and they were terrible. And they gave me no support at all. So I have now switched to a broker who I know much better and who does a lot more advocacy. So here's my number one sort of tip on choosing the right broker.

[00:37:11] However, when you choose your broker, the most important question to ask isn't, am I going to save $20? Can you get me a cheaper policy? So many people are so concerned with the cost of your policy. And of course, we all want to be mindful of premium and we all want to be mindful of cost. But if you're saving $100 on your premium by going to some market because your broker recommends it and you don't get your claim paid, do you really care that you saved $100 at the

[00:37:39] time of the renewal? You don't care. So I think what's really critical here is when you're choosing a broker, you want to first look at the fact that they have expertise in high-end homes. Let's say you're buying an expensive house. What's their expertise in high-end homes? Because that's typically quite different than buying a mid-range home. But more importantly, you want to say to them, what's your claims experience? You're going to help me buy an insurance policy. What are you going to do when I have a claim?

[00:38:08] Are you going to sit there and file my papers and say, oh, I hope they pay the claim? Or are you going to be a claims advocate for me? Are you going to actually champion my claim and get my claim paid? Because instead of me having to hire a lawyer, my insurance broker should be out there banging their fists and getting my claim paid. They should be my first advocate in the event of a claim. I used to run an insurance brokerage and I was a claims advocate, but I have a legal background, which gave me a little bit of an edge.

[00:38:34] But honestly, the biggest, most loyal clients I ever had that I was able to move with me from Marsh to my own brokerage, I got them their claims paid. You know, that's the most meaningful part of insurance that everybody still has to keep in mind. Saving a couple of bucks on your premium is irrelevant if you don't get your claim paid. So you need a broker that understands that. And if I mean, I had a friend who flooded in in 2013 and he had a wine seller in his basement that was worth two million dollars.

[00:39:04] He had bought his insurance without a broker through TD Bank. He had a twenty five million dollar sublimit for basement sewer backup coverage. So he did not get two million dollars coverage for his wine seller because he didn't use a broker and he didn't know what his insurance had. So really, you know, the message is get the best broker who can give you the insurance that's really tailored to your specific needs. Spend time so that they understand what those needs are.

[00:39:33] But make sure there are also a claims advocate for you, because when you're in a claim situation and you're stressed out, the number one thing you need is somebody helping you and advocating on your behalf. And that's whether you're a condo owner or a single homeowner. I'll tell you from personal experience, having a great broker who's responsive, you know, after you've been in an incident is critical. Absolutely. I've been I've been through it both ways.

[00:39:59] I've had a great broker and I've had a really bad one after a disaster at a property. And I'll tell you, a good broker is worth their weight in gold and it's worth spending the time. Otherwise, you're just spending money on insurance that isn't really going to help you anyway. Absolutely. It starts with a person, right? So it's it's super critical to find the right team. And I think that's the whole point of this is don't just go rushing into buying a condo and not understand how you're insured, how you're protected and pull another layer of

[00:40:29] the onion back and make sure that the person who's behind that insurance is actually not just an empty suit. They're actually a good insurance broker that can help you when there is a catastrophe. Because guess what? If something can go bad in real estate investing, it will. And you better be ready to to fend for yourself and you better make sure you have a good team that can back you up and support you because it will go wrong. I can tell you from firsthand experience of, you know, buying thousands and thousands of units.

[00:40:56] It will go wrong and you don't know when and it will usually happen at the worst time. You know, you're busy holiday, whatever it is, it'll happen right when you least expect it. And that's when your team will really shine. So I can appreciate that. How much do brokers cost and how much do they save you? That's a good question. Brokers get compensated typically one of two ways. For your average homeowner personal insurance, they get a commission. So let's say you're quoted a premium of 100 grand.

[00:41:25] The broker is getting some kind of a commission. It's usually expressed in a percentage. So in each location, it can vary a little bit, but they're not making a whole lot of money. If you're paying $10,000 for a homeowner policy or $5,000, they're only getting a fraction of whatever that premium is. They're they're getting paid that in commission. So it's it's really not much money. They don't get paid a lot. But let's say the average commission is 15 or 20 percent of a $5,000 policy, which typically your policies aren't that high anyway.

[00:41:53] That's peanuts really in the grand scheme of it. You're not making a whole lot of money. I do a lot of large property insurance. So then that 15 percent is is more meaningful. But a homeowner policy, they're not making a lot of money. Ultimately, they're going to save you money because they're shopping your policy around. So they're going to go to six or seven or 10 markets and they're going to get the best coverage for you. But again, the question shouldn't be necessarily how much money they're saving you. The question should be, are they getting you better insurance that's more tailored to your actual exposures?

[00:42:23] And are they going to help you get your claim paid? So they're going to cost you ultimately nothing at the end of the day if they're going to do a good job for you because their commission is low. And that's the point I really wanted to make is, you know, just like a good CPA, you know, sometimes people who have been doing TurboTax for their entire life will look at paying a CPA six or ten thousand dollars and they're like their eyes are like saucers. But hey, if if they save you six or ten thousand dollars on taxes, they were free.

[00:42:50] And that's going to pay dividends down the road as you become more sophisticated. Yeah, really. The benefit becomes the expertise. We're always advocating on this show for padding your bench with a team of experts that can help you in your financial life. Are insurance brokers usually siloed in the type of insurance they offer? What I mean by that is, do I need a broker for homeowners insurance and a broker for car insurance and a broker for umbrella policy?

[00:43:18] Or are there brokers that I can go to in my local market that can help me with everything? Yeah, for those policies, you should be able to use one broker. The split between brokers typically comes between commercial insurance versus personal lines. If you get a good personal lines broker, they're going to be able to do all of those things for you. The umbrella, the auto and the home and your boat and your jet ski and your and your anything that's personal to you. A personal lines broker can do that.

[00:43:47] And then there's the commercial insurer who deals with businesses as opposed to personal. Some brokers are both. But really, if you get yourself set up with a good personal lines broker, they can help you with everything you need as a as a person and even some smaller commercial exposures potentially. So, yeah, one broker can do all that. And how do you find that person? I know we've already talked about, you know, the Breckenridge condo and looking through your association. But as a person who's just looking for all of those different lines and maybe connecting

[00:44:15] with a broker who can look at their entire basket of insurance policies and make recommendations, how do you find that person? So I finding my broker, he ended up being a member of my same country club. But the reason I found him because I don't do personal lines insurance. I do a commercial. I just asked all my friends, realistically. I mean, he's listed as a broker. Like I said, you have access to these listings of personal lines brokers. I just asked my friends who have similar homes and similar exposures to mine.

[00:44:43] Then I said, who have you used in the past through a claim situation that's been really good? And they and I got one name recommended, probably, you know, nine out of 10 people. And that's who I went with. And I think a lot of insurance is done word of mouth. And a lot of brokers, you end up hiring them through referrals and people that have that are like you.

[00:45:07] And you just ask them for good experiences versus bad experiences and then go do the interviews. That's great. Same with a cleaning lady. Exactly the same way you find a good cleaning lady. There we go. That's hard to find. I know. That's what I'm saying. Yeah. I got one more before I turn it over to Ryan to close this thing out. A broker should be telling you this, but let's touch on it here. What are some of the major coverages I need on a home or a condo right now?

[00:45:36] And we talked about named storm. So what are some of those major coverages that sometimes get missed? So you basically want full property coverage. Property coverage is your main risk. So you want to make sure it's typically done on an all risk basis. You don't want named perils. So again, I don't want to get too insurancey in my lingo, but basically you want as broad of a property form as you can get so that there are there will be still exclusions in your policy, but there'll be there'll be few and far between because what are your biggest risks?

[00:46:06] Fire, water. You want to make sure you've got your coverage for those main those main factors that are going to be the expensive ones. And you really want to drill down when you do use the right broker. You're going to say, tell me what I have. Like explain to me what would happen in a fire. Explain to me if I have a water event that starts in my unit versus a water event that starts in a unit above me or beside. So you want to drill into those, you know, the most common coverages. So that would be your all risk property.

[00:46:36] And then you also want to have a component of liability. Because again, if you have a water event that occurs in your condo and it goes down, you know, unfortunately it can go down three, four or five units depending on who's home and who isn't. That's more of a liability coverage at that point because you've damaged third party property as opposed to your own. So you want to make sure you have your liability policy as well.

[00:46:59] You also want to make sure that for your property policy, you have enough limit to match the deductible on the association policy. So if your association policy has a deductible of $100,000, then you want to make sure that your property cover under your condo policy has a limit of $100,000, thereby eliminating a gap that you would otherwise have. So it's very important to be mindful of what those deductibles look like on the main package.

[00:47:28] And then you also want to have a coverage called special assessment coverage. And that can provide you with coverage in the event that you have a claim that maybe gets denied, but you have an assessment that the association makes against you as a unit holder. So you're now out of pocket. You can buy special assessment coverage. So even though your coverage wasn't there as a first party under your policy, if you buy the special assessment coverage, that brings back coverage for you if the association has

[00:47:57] actually made a special assessment against you. So those are sort of the three main baskets of coverage. And then within those, there's sublimits and other things. You have to be mindful of, for example, jewelry coverage and fine art coverage for paintings. There's typically pretty low sublimits. So if you have an expensive art collection and you have a lot of jewelry, you probably don't have enough coverage on a basic policy. You'll want to buy increased coverage, maybe with schedules. So there's enhancements and there's other things to be looked at.

[00:48:27] But those are sort of the main baskets that you're going to be contemplating. That's great. Very customizable. Yeah, definitely. Well, Val, this has been really helpful on learning about condo investing, condo insurance, picking a great team, you know, kind of fits the theme with everything that we're trying to work here. And now we want to help our listeners, you know, build their bench. You know, how can listeners get in touch with you and learn more about working with you potentially? Yeah, absolutely.

[00:48:56] So I am on LinkedIn through my company, which is Palm Insurance Canada. And just under my name, Valerie Cassano. So I'm pretty easily Googled as well. I'm not hard to find. So people can message me, send me emails. I'm very approachable, as Tate knows, after my presentation in Hawaii. People call me all the time. I had a phone call from a homeowner last night trying to get some help with insurance. So yeah, I'm happy to help. Well, great. Thanks so much for your time, Val, and coming onto the show.

[00:49:25] And thank you for everybody tuning in. If you're listening to this and you want to learn more about investing, talk to the other airline pilots in our community. Join our Facebook group, Passive Income Pilots. And until then, talk to you on the next show. Thanks, Val. Thank you. Thanks, Val.