Hello. Welcome back to another great episode. My name is Sarah Karakaian.

I'm Annette Grant, and together we are. Thanks for Visiting.

Let's start this episode like we do each and every week, and that is celebrating one of you, our incredible listeners who are heading on over to strshare.com, sharing everything about your short-term rentals so we can share you here on the podcast. And on our Instagram account because I said channel, she would elbow me right now. Uh, every Sunday. Annette, who are we sharing this week?

This week we are sharing @thelaurelloft in San Diego and it is absolutely beautiful. I'm just gonna share, I have not seen a aesthetic feed like theirs.

What do you mean by that?

Remember back in the day, the good old early days of Instagram, like there was a cohesiveness of like, color and vibe and, and like all of the tiles would actually like tell a story And be together before, um, the kind of TikTok reel, you know, face to camera took over. It took me back, but I love it and I was like, oh, this is, this is really great. But they do have reels. They just make sure their cover on everything is in the design aesthetic of their home. And so I really appreciate it.

You know, that tells me about their hosting style, what they care about, the details.

They do care about the details. One thing I want to pull out that I think is a great idea that I'm gonna offer to all of you, host two copy off the Laurel Loft. I hope they don't mind. They do this really cool reel every year and it's a year in reviews and they go through and screenshot and share all of the reviews. And what I love about it as a consumer is they do it each and every year. So again, they building that trust. They are gonna get these five star reviews. They got them in 2024. They got them in 2023, they got them in 22. So it really just shows that history and hosts, this is that thing where when you can start to have content that is consistent and you're like, oh, I made that real last year. Actually, Sarah and I do this, um, on our podcast we do. A year in review of all the highest rated podcasts. So that's just something that we can lean on every year that we do. So go to their Instagram, check it out. And then last but not least, the one thing that I wanna share with you is, again, right there on their, um, bio, they have purchased their .com, thelaurelloft.com. You can go directly to it and book direct. So well done The Laurel Loft. We wanna plan a trip now to San Diego. But before we do that, Sarah, let's get serious, right?

We have to talk to Darren Nicks, who is the founder and CEO of Steadily, one of the fastest growing landlord insurance companies in the us. And his journey into InsureTech, which I didn't know that was a word, but now I do. Started with a personal loss of his own as a real estate investor himself. He had a rental property, and you're gonna learn about this story in entirety, but it burned down and he was shocked by how confusing and slow the insurance pro- process was. To get back up and running. That experience sparked a mission to build a modern landlord insurance company that worked for and is built around the real estate investor, which I've always been taught that if you want a great CPA find a CPA, who invests in real estate themselves. So how cool would it be to work with an insurance company? Whose CEO and founder is a real estate investor himself, who has experienced the not so fun side of working with an insurance company who doesn't feel like they're a partner with you along the way. So this episode is chockfull of tips and tricks on how to make sure that your insurance policy not only. It has adequate, adequate coverage for you, but also how you can maximize the ROI of your rental as a landlord 'cause you can remember Darren is an investor himself. He wants cashflow too, just like you all do. So I, he, he threw me for a loop with a couple of his tips, especially being the CEO of an insurance company. Darren, there's nothing like welcoming you to the TFE podcast than by asking you about this tragic loss you experienced that catapulted this next journey in your life. Can you share what happened that inspired Steadily?

I made so many mistakes as a property investor. That's probably the third one that I made, but certainly the most expensive. So it was a property in South Carolina. Second one that I had owned. I was two years into being a property investor and I got a call from my property manager, which was unusual. They never call me. And I, I screened the call the first time 'cause on it's in a meeting, and then the phone immediately rang again like a minute later and I was like, okay. I probably need to take this. So I pick up the phone and she says, Hey, um, I have some, I have some bad news. Your property burned down. And I'm like, what? You know, like it, when you get that kind of news, it's, it takes a minute for your brain to catch up to that surprise. So I am, I'm kind of speechless for 15 seconds or so, and she's like, yeah, so, they think there was a space heater or something and the fire trucks are out and it's on the news. And so I go to the, I pull up the local TV station 'cause this property is 1500 miles away. I'm living in Texas and the property is in South Carolina. And yeah, one of the tenants had gone for work and a space heater had knocked over and it was a triplex, the middle unit, and a triplex and it basically burned it to the ground. But it's kind of a testament to the quality of the construction that the units on either side were actually okay and 11 months later, $250,000 in repairs. Um, plus some, you know, loss of rent and paying for my tenants, uh, hotel bill and everything. That was, that was my journey into the wonderful world of huge insurance claims for rental properties. This was well before I started settling, by the way. This was just the, one of the many things that set me on that path.

You, your experience was dealing with the insurance company was tough and it took a long time and it seemed like maybe you were confused about the process and you were just unimpressed.

Incredibly confused. And about 11 months beginning to end there was, I kept getting these, I, I guess it was more of, I, I didn't even know where to start because I am, this property burns down. I call the insurance company, I say the property burned down. And they're like, okay, thanks for letting us know. Like, um, do you have a, like, has work started on repairing it? And I'm like, uh, I, so should I, am I supposed to go and find a contractor and then I send you the bill? Like how does this work? And. So the long and short of it was, yes, I went knocking on doors remotely because again, it's out of state. Talked to a bunch of people, finally found some contractors that were willing to go out and do an estimate. A few weeks go by, they emailed me this 35 page long PDF, that list the number of screws that they'll need to repair the property and everything. I later learned that's called an Xactimate estimate, and they sent that to me. I sent that to the insurance company and I, they were like, okay. So I just picked this guy. I didn't see him. He starts working on the property, and a long time later, um, the property got repaired, but I realized along the way that I had ended up paying about $30,000 out of pocket above and beyond what the insurance paid for because of some mistakes I made along the way of organizing it. And I think that the, the main takeaways that I had was just, I didn't know what I didn't know. And I sort of expected that the folks who deal with fires and insurance claims day in and day out would sort of step in and say, okay, we got this. This is what we do. We'll let you know when it's done. Because that's what had happened when I'm, when my car had gotten damaged, you know, five or six years earlier, I'd been in a car crash. I reported the claim and they said, take it here, do these things. You'll get the car back in three weeks. Here's a loaner. And it was kind of like painless. But getting a, a rental property repaired from 1500 miles away was the complete antithesis of that. It was, it was bad.

Was this your last rental property or did you continue to invest?

I'm a glutton for punishment, so I kept buying more. I, South Carolina was a one of the many mistakes that I made as a rental property investor. Not because there's anything wrong with that market, but because it was the one part of the country that I had never lived in. So, previous to that, I bought a, my first property was in Chicago, in a neighborhood where I used to live Indianapolis, and where I grew up in Texas. Kansas City. These were all markets. In places where I had family, I'd spent a bunch of time, so I knew the markets. South Carolina was one that I picked by looking at the rent to buy ratios and being really quantitative about it in spreadsheets, and it's not a coincidence that that one went badly.

Interesting. I, I like that you mentioned that 'cause in the short term rental space, so many people just want the best buy. And there's so many, Sarah and I chat often about how the spreadsheet doesn't tell the whole story. There's a lot of other, other reasons to purchase a property. Um, besides. You know, reviewing the spreadsheet and what, uh, what all the, the, uh, what the math would tell you 'cause there's a lot involved, like you just said, there's emotions a part of it too. We wanna talk about, we think, let's talk about risk. That's what we're chatting about here. We talk to so many hosts and the first thing, everybody still to this day, whether they're a new host, a seasoned host. They still wanna talk about the guest and the guest damaging a property or the guest having a party. But we know, you know, from data that isn't what most insurance claims are on short-term rentals. Can you kind of debunk, um, those myths and like what are actually the things that people are claiming in their short-term rentals the most? Just to kind of reinforce that for, for ourselves and our listeners.

The single biggest loss is fire, fires don't happen all that often. When they do, it's gonna be a hundred thousand dollars. And in fact, the average amount of a fire claim is $95,000, sometimes much more. The second biggest loss is going to be wind. So that's when hail or a tree blows over and falls on your roof. Hail is gonna be a $15,000 claim 'cause that's what it costs to build the average new roof. If a tree blows over, now it's $50,000 because you're not just repairing the roof, now you're replaying. Now you have to pay to get the tree cut down, hauled off of the crane, get the wall repaired, repainted, et cetera. And then the last one is water. So a pipe burst, hopefully it bursts on the ground floor, so it just floods, you know, the main floor in the basement if it bursts on the second floor. Now you're talking about replacing a lot of drywall, mold, et cetera. That's typically a $30,000 claim. So from my perspective as, uh, at my peak, I owned 15 doors and some of those were short term and midterm rentals. The tenant damage is really annoying When it happens, don't get me wrong, but it's not the source of the, the really big insurance claims, like the really catastrophic stuff. Those things are the ones that happen a lot more rarely, but when they do happen, they're severe. So in insurance world, we'd call that low frequency, high severity.

And, okay, if a host is a new, you know, they're, they're just getting into short-term rentals. They finally understand that they need a certain kind of insurance to cover short-term rentals, which let's, we'll backtrack to that in a moment here, but how can we better, how can Annette and I with you here today better prepare our listeners to. Ask the right questions. How do you know if you've never experienced catastrophic loss like this with your rental or it's your first rental, or how do they know that they're adequately covered? They're gonna get great guidance. What do you say? How do we educate them?

Two ways. Number one, my favorite is to find a community of folks that have done this already for several years and to pick their brain. That's number one. Number two is to interview your insurance agent or your insurance company and find somebody who's done a hundred rentals before and has seen a bunch of claims already go through so they can speak in an educated way about what happens. Because an insurance form is on average 45 to 70 pages long, and you want to talk to somebody who knows what's in it from memory. Not having to go and read it to try to figure out what's in it to see if a particular situation is covered.

Can we put our policy, do you trust putting it through chat GPT and asking it to help us find, like educate us on it or find any flaws in it?

Trust is a strong word.

Okay.

Or would would I do with ChatGPT, I don't trust its answer, but I trust it to tell me where the answer is.

Okay.

So what I would say is, here's my policy document. Tell me the PO place in the document. Show me the exact paragraph that explains if I'm covered for X, and then it will say, okay, your stamp collection is covered for $2,500. And then it shows you the actual tax to what's in the policy. That I love, because now you've removed the risk of hallucination. Because what's happened to me a billion times when I just said, Hey, does my policy cover x or when I'm working on, like, let's say a pilot's license I say is blah, blah, blah, legal, and it gives me an answer. It's so confident, but it's just wrong. It just hallucinated the enter. And so if you instead you ask it for, show me the source of where this answer is now you can easily with one extra click, verify that it's accurate.

So I like this. So today people could take their current policies and we just went over fire, wind, hail, tree, water. We could. If they could put their policy in and ask specific questions like, take me directly to fire coverage. Pull that out. It sounds like we could do that to at least after this episode, go in and really dig deeper into these top areas that you said, let's, let's review those. And they could, they could look at those. I like that as, uh, something that's digestible easy and they could educate themselves and kind of see if there's some, maybe holes in their policy or not ahead of time. I, I, I'm here for that. That's something quick. And, um, I think pull it so you're not overwhelmed by the 45 to 70 pages. They can kind of dive, dive directly, dive directly in.

Easy.

No, that's, that's great.

When it comes to the agent though, and making sure they've, they've seen a lot is. Just asking them how many policies. If someone's interviewing, uh, a new insurance agent or, or someone's listening to this episode and they're interested in what and Steadily what, how do we qualify the person we're talking to has our best interest in mind. Because I think Annette and I feel it's not just obviously in the insurance industry, but in a lot of different areas of our life. We feel like we're kind of in a trust recession right now, and everyone is kind of doubting everyone's intentions. Since you're on the other side, what are some great questions that a host could, could ask an agent to kind of qualify them as, uh, someone they can trust?

Number one is how many insurance policies on the rental property do you write in a typical month?

Okay, what's a good answer?

You would like to hear something like 20. Okay. Or more. Okay. That indicates that they're a specialist. Okay. Number two is to ask. When you compare the types of losses that occur on a rental property versus a homeowner's policy, how are they different? That's also gonna tell you if they're keyed into those distinctions, and in particular if they follow up and say, well, are you a midterm host on furnish finder? Are you in your Airbnb or Vrbo? Are you doing long-term rentals? That they ask those kind of nuance questions.

Yeah.

Great. Now you're talking to someone that's been around the block several times and they're going to know the and outs. The trust piece is another great dimension, and that's where you can sort of ask some leading questions that somebody who just wants to sell you as much insurance as possible would go down and be like, oh yeah, you're gonna need a $5 million umbrella policy and you're probably gonna need 2 million in liability, blah, blah, blah, blah, blah. And if you know, going in that. Hey, I just don't want rental property and, and my net worth in my household is, you know, $650,000 With my 401k, you probably don't need a $5 million umbrella policy. Like you just don't have the kind of assets that are gonna make a plaintiff's attorney want to come after you in a liability lawsuit. And so if somebody's trying to sell you all of those, uh, odds and ends coverages, they may not have your best interest at heart.

You mentioned, uh, midterm rental in that last segment, what, what are the differences or what should we be on the lookout for? If we are doing, we do a hybrid strategy at one of our properties, going from short term to midterm, like toggling between those two, is there anything specific hosts doing that strategy need to be aware of?

Vacancy duration. It is such a gotcha in insurance because there's this misconception that the tenants are what caused the damage in a property. It's not vacancies are what damaged the property because if a water starts dripping in the attic from a roof leak and you've had a vacancy for three weeks, by the time somebody comes in and notices, that's gonna be a $40,000 repair. But if somebody had noticed it on day one, it would be a $3,000 repair.

Right.

And so that type of experience over the course of hundreds of years of insurance companies gathering data on how losses happen, turns into a 30 day limit on vacancy for most insurance policies. And so if somebody has a typical insurance policy and they put the house on the market and all the tenants move out because they're planning to sell it. Ask me how I know, and 50 days go by and then somebody breaks into the property and does a bunch of damage to it. The property has now been vacant for more than 30 days. Your insurance policy will not pay for damage. Because it's been vacant for more than 30 days, and they're like, no, we, we priced it assuming that there were people living in the property who would find these types of issues. Think about vandalism. If you have somebody living in the property, the odds that somebody's gonna break in and graffiti the walls are pretty low. But if you've got a rent sign that's been outside of the building for 45 days and anybody walking by can see that there are no lights on, your odds of getting a vandalism claim go up like 500%.

This vacancy duration that is, that's new to me. I've not ever,

right, so how do we, is there some sort of clause we can get, so that doesn't apply if we're midterm rental hosts or how does that work?

You just, when you're going to have a long-term vacancy, you call up your insurance company and you say, Hey, my property is gonna be vacant for more than 30 days. Add on coverage.

Right.

For long-term vacancy and it's not that expensive, but they have to know about it ahead of time.

Interesting.

So what about, what about an accidental long-term vacancy? Let's say a host just, they went to midterm, they're trying to get it rented out, or they went to short term and for some reason they haven't gotten any bookings. You know, they haven't, they kind of have not been paying attention to their listing for 45 days. What happens if it was accidental and they just were sitting open like that? Is that where the insurance company would still like focus them back on that vacancy duration? Like there is no such thing as accidental. They need to have awareness of that.

Yeah. The policy doesn't speak to intent, it just says,

Right.

oh, the property was vacant for a long time and especially if the vacancy was what they would call approximate cause. So I'll give you an example. If the property's been vacant for 45 days and a storm blows through and rips the roof off. The roof would've gotten ripped off whether the property was vacant or not. So the policy is still gonna pay for that. Okay? But fire, vandalism, water damage, those are things that probably would not have happened if the property is occupied. And so then the policy is gonna say, we shouldn't, this shouldn't have happened because we agreed that we were insuring an occupied property. So where this is going is. There's a lot of gotchas. No one can be expected to know all of these gotchas. And so the best advice that I can give that I wish I had followed myself is call your agent. When something changes. You don't need to stay on top of it when things are in a steady state. If you've been renting it for four years, tenants are coming and going. No need to check in with your agent, but if something changes. Send them an email and be like, Hey, this thing is happening. I just wanna make sure I'm covered. You decide to upgrade your listing to try to be able to get a much higher nightly rate, so you buy a hundred thousand dollars of high-end furniture and you move it all in. Well, guess what? Your policy probably only covers you for 10% of the face value of your policy. So let's be more specific. Let's say that you have a $250,000 policy. That means that by default, you're only gonna have $25,000 worth of coverage for furnishings. So if you just moved in a ton of high-end stuff, you need to email your agent and say, Hey, I'm bringing in like leather sofas and a $10,000 stereo system or a hot tub or whatever it is. I wanna make sure this is gonna be covered and they'll check your limits and be like, okay, I just bumped it up to like, whatever. And probably it'll add like 14 or $15 to your, to your annual bill, but you'll know that you're actually covered because you sent that note.

You just mentioned it briefly, you said hot tub, but what are, what are exposures? So many people now are doing saunas, cold plunge. Pickleball court. What, what are, what exposure is there is and is that also when you're adding amenities, whatever that amenity might be, is that a call ahead of time to, to review, also, like do you find that a lot of times that hosts are implementing amenities and then calling to see if they're insured on them?

Yes. But the good news is that for most amenities, getting them insured is not gonna change the bill all that dramatically, as long as the company doing the insuring knows ahead of time or, uh, is told ahead of a claim. So you don't wanna wait until the claim happens to let them know that you, you made all these upgrades. But when you're talking about risks, the way as a host, you can boil this down to. Where there's risk is asking yourself, what's the probability that a 6-year-old is going to get badly hurt in my property? So a pickleball court shrug a hot tub, potential concerning, a trampoline with no netting around it. Extremely high concern, all with no locking fences, pretty high concern. So these are the types of things that insurance companies. Worry about and figure into the, you know, the cost of the insurance. Because what they're looking at is what are the odds that I'm gonna end up paying a million dollar, uh, liability claim because something really bad happened. That's what they're trying to do the math on.

Okay. So the, is that, is that a common thing that hosts should think? Like, honestly, is this the 6-year-old? Like who is the guest that's gonna be using the property? Is that kind of the, can our host start doing the six yearold test of like, just thinking through all of them and is it like, do you think, do you think of the older adult, do you think of the, um, middle aged adult and then a child when you're kind of processing what you, what you're thinking about adding to your home?

I would advise hosts to make the investments in the property, regardless of the insurance landscape that they think is gonna deliver the best return on the property. So the property needs a trampoline or it needs a pool, do it. But when you're trying to anticipate how the insurance company is gonna react and what's probably gonna happen to the premium, the, you can predict how they're gonna react by imagining what bad thing is gonna happen to a 6-year-old when they encounter that thing.

I know that a lot of hosts think that they're protecting themselves Darren and by an additional waiver. So they'll have a pool waiver, they'll have a hot tub waiver, they'll whatever amenity they have. How do, how do those, do those actually protect the host, or does the insurance company need to have reviewed that waiver ahead of time? Because I do feel like we talk to a lot of hosts that require all these waivers to be signed, and I don't know if they're actually going to protect them. If something were to happen.

They're not actually going to protect them in the way that they wish they would. They're better than nothing. And the insurance company does not want to review them because it would cost them, uh, $500 to have an attorney pick up the phone and take a look at that contract. So it's better than nothing. But the problem with these types of contracts is that in, when you think about lawsuits, number one, in the United States in particular, nobody has to expect to win a lawsuit in order to file one. And just defending a lawsuit is often a hundred thousand dollars endeavor. Even if you know you're going to win, it's still gonna cost you a hundred thousand dollars. Um, number two is that in many cases you're not trying to convince a judge. You're trying to convince a jury, and juries are weird. And so as a host sure have people sign the waiver, but buy insurance anyway.

Right.

Is my take because, uh, that, that piece of paper very, very likely will not hold up, uh, when it's, when something bad happens.

Yeah. And now that we've talked about all these, I won't say scary, although I want to all of these realistic potential events. Let's go back to the fact that Darren, there are still hosts out there, experienced hosts who don't have the proper coverage. Either they have homeowners insurance or a landlord policy, and they sign up and they list their property on Airbnb, an Airbnb touts air cover, and they don't think twice about it. How, what, how would you explain to these hosts who still don't understand or haven't really thought about it in a way that until it's, it's too late? They may be inadequately covered and that Aircover isn't the best insurance policy for them or one at all.

I want to answer this in two ways. One is just to give the crisp explanation of what air cover does and doesn't cover, and then two, to talk about what is too much insurance and when you might consider buying less insurance. So air cover, you can think of it as simply from the time that the check-in starts to the checkout time. Aircover will pay for damage that the tenant does to your property. So if a tenant comes in and pours beer all over your couch and you have to get that replaced and they did it during the time of their stay, air cover will pay for that. If a tornado comes through. Blows the roof off your property while a tenant is staying there. Aircover will not pay for it because a tenant didn't do it, nature did it, and they're expecting that your homeowner's policy or your landlord policy will pay for that. And so Aircover is always intended to be paired with a landlord insurance policy because the landlord insurance policy covers the brick and mortar and it covers all of the things that happen to the property that happen when the guest is not in the property or things that the guest didn't do. So Aircover is actually quite limited, and typically your Aircover claims are gonna be like $500, a thousand dollars, like a broken window, like a, a messed up couch, stuff like that. The landlord insurance policy is typically $20,000 claims, $50,000, a hundred thousand dollars, like much lower frequency, much, much higher severity.

And if we're doing short term stays, is a landlord policy adequate? For, for that.

A lender policy works just fine. And 20% of the business that we write is on Airbnbs out of the like a hundred thousand policies that we write per year. But the other thing that I want to mention, part two of this is what's too much insurance. So as a landlord, you have a choice that you can make. You can use insurance to insulate you from catastrophic events and accept that you're gonna have to pay out of pocket for the bumps along the way. And by bumps, I mean anything under $3,000. Or you can try to use insurance to make your ride completely smooth so you're never paying out of pocket for anything that happens. You can do it the second way. But it's gonna lower your annual returns. A lot. Because that type of insurance is really expensive. And here's why. The insurance industry on average, runs about a five to 6% profit margin. It's like, it's a very low margin business. And so if you pay in a year, a thousand dollars in premium. The insurance company at the end of the day is gonna make a profit of about 50 to $70 on that a thousand dollars, and the rest of that is gonna be ba be paid out in claims and overhead of running the insurance company. But the simple act of buying, of paying a thousand dollars for coverage when you know that the insurance company is gonna make a profit and has their own overhead, means that for every dollar that you're paying in coverage. You're probably gonna get less than a thousand dollars back in claims payments. And so by definition, insurance is an expensive thing to buy. So you wanna buy just the right amount of it and not buy too much. And if you're using insurance to try to pay for $500 broken windows and a thousand dollars couches to like smooth out your investment returns. You are paying a ton of money to someone else to reduce that volatility. And generally speaking, my advice to my friends who own Airbnbs is instead of buying a super expensive insurance policy that's gonna pay for a broken window, take the money you would've spent on that Cadillac insurance plan and put it into your, into a separate bank account. That's your self-insurance bank account. And then when those broken windows happen. Paid out of your own insurance fund and at the end of the day you'll save money doing it that way. So this is the insurance guy telling you to buy less insurance?

Yeah, I, and I, and I like this take on it. So, and are you saying then that when they are on the phone and you've given them those, these great, great questions to ask the insurance agent to tell 'em they'd like to focus on fire, wind, and hail.

And water damage.

And water damage. That was what I want. Water damage. Is that, is that the focus and then this, everything else is pretty much put and considered, potentially smaller or are there, are there claims that happen and they're kind of in that mid area that we wanna make sure that we have good coverage for too?

All of this gets boiled down into the deductible. So if you go to an insurance company and you say, I wanna buy a policy that's a $500 deductible on it, or a two 50 deductible. What the insurance company hears is this is a person that's going to file a lot of claims because every time anything happens, no matter how small, there's gonna be a claim for it. Whereas if somebody comes along and says, I wanna buy a policy with a $2,500 deductible, or even a 5,000 or a $10,000 deductible, what they now hear is the only time this person is going to call me is when a tree falls on the roof or something really bad happens. So the difference in price for an insurance policy with a 500 versus a $5,000 deductible is gonna be enormous. And so for investors that have a few thousand dollars that they can squirrel away in a rainy day fund and self-insure a little bit, are ultimately going to make higher profits on their rental because they're not spending as much money on insurance.

Is there a time when you, you had mentioned earlier that when there's a change, that's definitely when you should reach out. Is there a time when, let's say you brought in an additional amenity or something's going on in the area and you're really seeing a significant spike in your revenue from years prior, is there a revenue change that would ever trigger an insurance upgrade at all?

Not from a property insurance perspective, but as someone's net worth starts to increase, you start to worry about how juicy of a target are you going to be for a plaintiff's attorney. Somebody who just sees a big pile of money with stuff to take. And so that's when, when people started to get into having two, three properties. A lot of net worth that they've built up over the years. That's when they start asking questions about umbrella policies. Because the umbrella policy is what kicks in with really high liability limits above and beyond what a landlord policy would cover. So let's, let's use specific numbers. Let's say somebody buys a landlord insurance policy on a $300,000 rental and it has a million dollars of liability coverage. What they're starting to think about now is, oh, but I own a bunch of rental properties and my net worth is 3.5 million. And if somebody, um, the odds are low, but if something really bad happens and there's, uh, somebody dies on one of my properties and they name me in a wrongful death suit because I, you know, fail to have the, the parking lot iced, uh, with salt after the snow storm or something like that, and they hold me liable. They can come after all of my assets as the owner. And so then they start thinking about buying an umbrella policy to raise those limits to 3 million or 5 million so that they're having protection for those like long tail super catastrophic outcomes. And that's generally the, the more you see someone's net worth go up, the more likely it is that they're gonna be buying a high limit umbrella policy.

Like that. That's the key. I think also Sarah and I talk to hosts every day, and they are, maybe they start with one property and then they do, they end up with a full portfolio, which their guests can go online and pull up their direct booking website and see that. You know, Susan owns seven properties and they can kind of get an idea of what her and her family is working with at that point in time. And so the umbrella policy, is that something that the landlord policy, could they help us with that or should we go to a different insurer for that?

Almost across the board, whatever insurance agent that you end up working with, if they do landlord insurance, they're also gonna have landlord. Or if they do landlord insurance, they're also going to have umbrella policies.

Great. No, that's a, that's a great, I like that. It's, so to recap there, it's not necessarily the revenue on the individual property. It's your overall net worth that should trigger that umbrella policy.

That's the way that I think about it because just because your revenue went up on a property doesn't mean that the risk on that property changed at all. One, when we're talking about various s gotchas, the one that does come to mind as revenue starts to increase is, let's say that somebody bought a property in 19 or in in 2019 and they insured it for a quarter million dollars. And they've been happily plunking down their insurance premiums every year, and now it's 2025. What do you think that house is worth now? A lot more. So maybe that house now is a $500,000 house or a $600,000 house, especially if it's in a vacation town. And so the house now is ridiculously underinsured. So if the house got totaled in like a fire scenario and the insurance company is gonna look at the policy and say, well, you bought $250,000 worth of coverage, so here's your $250,000. And the owner is saying, yeah, but it's gonna cost me $500,000 now to rebuild the property because over time the insured value of the property got out of sync. With the, the cost to replace. So this isn't a, a thing that people need to think about every year, but as people are doing those, uh, you know, every five year look backs asking, hey, is do I actually have enough insurance to rebuild this property if it burned to the ground? That's really the question.

So. This is a, this is a moment. If you have been listening to our show since 2019 and you haven't increased the coverage on it at this, your sign or looked, or you haven't looked at, you know, what your home currently is worth, or you've been touting to everybody, how much equity you've gained in that home, but your insurance premiums haven't changed, you probably need to check yourself, call your agent, make sure you're in alignment still with that.

And what do you do, Darren? Do you suggest that they get the home reappraised? Is it really just what Zillow says? How, how can a homeowner

Yeah. Most of

share that information.

Yeah. Most of our hosts have purchased pre COVID. Yeah. Um, and I think they have a decent amount of equity growth since then. So what should their move be?

The good news is, this one's really simple. The insurance company is all run a replacement cost estimator. So you just give them the address and say. Hey, I wanna know what your estimate is to rebuild this property. If it burns down and they'll come back and they say, uh, we think it's 300K, and you're like, great, then I need 300K of coverage. Because it's not the market value of the house that matters, it's what it costs to rebuild it.

Okay?

So let's say that you own a, uh, I've seen these houses in San Francisco. You can buy a literal shack. For $700,000 because the land is worth $698,000 with a $2,000 shack on top of it. And so the replacement cost for the shack is $2,000. Like eh. And so when you're thinking about how much insurance to buy, it's not what it says on Zillow that matters. What matters is the cost to rebuild the property. And generally speaking, if you just take the square footage and you multiply that by 200, that's gonna get you into the ballpark. Some places we'll see that go down to like one 50 and in really high end markets that might go up to like 450 or 500 per square foot.

And you said that, are the insurance companies running that yearly? When, um, are, when we are, you know, looking at the renewal, is that automatically if they're on top of,

if they're on top of their game? Yes.

Okay.

If they're not, no.

Okay. So that is, that's another pro tip though, if, if you're not, if they're not doing that automatic, um, what, what did you exactly call it again?

Replacement cost estimate.

Replacement cost estimate at your renewal, then they, they should, uh, you might wanna, you might wanna nudge them or look elsewhere. Okay? Replacement,

every, every, every few years. Do that. You can do this as a thought experiment. Think about the last time you had work done on anything in the house, like a new bathroom, a new kitchen, whatever. Just say, how much did I end up paying per square foot? And then extrapolate that to the rest of your house. And that's kind of gonna give you an understanding of you really can't get anything done in most cities for less than 200 bucks a square foot.

Yeah, I like it. Alright. Darren hosts have a lot of options. Why Steadily? What makes Steadily different? And I'm wondering if one of those differences is when something catastrophic happens. If there's a partner on the other end to help them know what that first step is. When something happens and panic sets in and the host just feels overwhelmed, or what is it?

The reason everybody should choose Steadily out of the many options they have is because landlord insurance is all we do. We are landlords, and when a claim happens, we are the claims adjusters. So from the time that you call us to ask questions about your rental property. For the years that you're insured with us all the way up to the moment when we rebuild the property for you, you're with us the entire way. So we know nothing better than landlord insurance and rental properties because it's literally our only product. And we at this point have 110,000 customers across the country that we've been able to help. And they're all landlords.

And this is US only, correct? Just for our international listeners. Lemme make sure they're,

this is US only today. Call me again in a few years.

Okay. I like it, Darren. I love that. I like this. And so what if someone listening is working with a broker, could they say that they want to hear more about Steadily or they have to call Steadily directly?

That's a good question. Both ways. So a huge chunk of our customers come direct those that wanna work with an agent, we have at this point, more than 15,000 agents across the country that sell Steadily policies. And so both ways work just fine.

Interesting. And then as we wrap up, what is, what is an insider tip? Something that you think every short-term rental host should know, whether it's about insurance, uh, risk, anything, what's, what's one thing that you feel is under where hosts are underserved?

Hmm. You got me on this one. You're gonna have to edit this while I think.

That's okay.

I already used the one about, um calling your agent when something changes.

That's okay. Then that's, let's just reiterate that because I think sometimes what could be when it is something that changes, what, let's, let's pause on that. What is something that we wouldn't think is an important change that an agent would be like, oh my gosh, why didn't you tell us that, that you see all the time of like, we didn't think it was that big of a deal, but it's like so obvious to, to the insurance company.

Great. The thing that, the thing I would ask folks to do is to fire off an email to their agent, describe the property and what's going on with it, and just say, am I covered? Because it takes 60 seconds to fire off that email, and you might be surprised. So as an example. There are a bunch of people out there that have this type of coverage called actual cash value, not replacement cost, and they don't know it. And in the scenario where something bad happens, they're probably gonna get paid about a 10th of what they think they're gonna get paid by their insurance policy. They don't know it. And all they would have to do to figure this out is to email their agent and say, Hey, I'm planning to buy this property in Airbnb. It. If the property burns down, will I get paid full replacement costs for the property? My property is about to be vacant for 45 days if something happens on day 45. Am I covered? You don't have to think of all the gotchas that might be out there. Just describe the state of the property. Describe the state of the world and say, am I covered? I do this myself. I'm an in, you know, I, I own an insurance company and I bought an insurance policy. For another type of product that's not landlord insurance. And I emailed my agent three weeks ago and I said, am I gonna be covered in this scenario? And he wrote back and he was like, I checked the policy and you're good. And that was how I slept well at night. Because like I said, the policy is 48 pages long. Even if I did read the whole thing, I'm not gonna be confident that I understood it. But that's the agent's job and it can give tremendous peace of mind to just fire off that email with a few bullet points and say. Is this gonna do what I think it's gonna do?

I think that's actually the pro tip right there, Darren, is that you own an insurance company and you still have doubts and you know that when in doubt, reach out to to your agent and get that confirmation. Because I also feel like sometimes people don't reach out. It's like, oh, is that a silly question? Or I don't wanna bother them. It's like, no, absolutely. Ask those questions out.

It's very different than emailing your CPA, your attorney and you get charged by the minute where like exactly you can email your insurance broker and just

Good point, good point. You're we're scared, you know, not scared, but you're like, ah, is that question worth getting billable hours?

And I, I blow up my CPA and attorney 'cause I'd rather know that's my personality. But it's, it is nice to know that you can just email. Just ask.

So by the way, for those listening, I am in charge for Thanks for Visiting. I'm in charge of the CPA and attorney, so I am diligent on the questions that I ask.

Yeah. And there's properties that I don't own with you, and I am asking them questions all the time. Darien, if someone has a policy in place and they think it's fine, we'll Steadily look at it and compare to what you guys could offer and give them an on, uh, honest feedback on it.

We do it all the time, and most insurance companies out there are great. So I'm not here to tell everybody that they should come switch to Steadily, but if for some reason they're unhappy or they're struggling to get coverage, please come to Steadily.com and we'd love to give you a quote.

Awesome. Great. So as that, the best place to find out more about Steadily go is Steadily.com. We'll put links in the show notes too. But anything else we should know about Steadily before we sign off Darren?

Landlord insurance is all we do and we would love to help.

Ah, great. I love that. This, thank you for your time. This is great. Open conversation, honest conversation. Darren, thank you so much for helping all those hosts out there. With that, I am Sarah Karakaian.

I'm Annette Grant, and together we are. Thanks for Visiting. Talk to you next time.