In this podcast, participants will learn the fundamentals of how to find the right landlord insurance coverage for their properties with the help of Honeycomb, a platform for managing and analyzing property data.
In this podcast, you'll learn about:
In this podcast, participants will learn the fundamentals of how to find the right landlord insurance coverage for their properties with the help of Honeycomb, a platform for managing and analyzing property data.
In this podcast, you'll learn about:
What's up everybody and welcome back to another episode of Loop It In, the Door Loop podcast, where we pick the brains of experts in property management, real estate and investing. Tech, we cover it. Marketing, that too. So whether you want actionable tips or the insider scoop from top performers in their industries, this is one show you won't want to miss. Be sure to subscribe so you won't miss out on any future episode. Hi everyone and welcome back to another episode of the Loop It In podcast. Today I'm joined by Barak Lebanon. Now Barak is the VP of Growth for Honeycomb Insurance, which is also a tech-forward focused on retail properties. Barak, why don't you tell us a little bit more about yourself? Hi, Muhammad. First of all, thanks for having me. I'm excited to be here. So I run both efforts for Honeycomb Insurance. We're a tech-forward, MGA, which is basically a carrier, and then we focus on rental properties and car association. So imagine any residential rental property, it could be a single-family rental, duplex trip, and so forth, or even an apartment building, or if you own an apartment, sorry, a condo, and you live in an HOA, you need car association insurance. You might not know that, but your HOA president probably does. So we specialize in these types of insurance. We are commercial land of insurance. We've been on for almost two years now, and what we're trying to do is really to reinvent how this insurance is being priced and being sold. There's tons of companies out there selling insurance. You probably know a handful of them, but we've set out on a mission to change the way people buy insurance and to make it easier, faster, and eventually cheaper. That sounds amazing. But first I'd like to know a little bit more about what's the old way of doing things? You said you guys want to start reinventing how things are priced, how people get their insurance. So what was the old method, and why wasn't it working? So imagine you're a real estate investor, and you set out to buy an investment property. You buy a single-family home, and you take a mortgage, and now you need to buy insurance for that property. Unlike a typical homeowner's policy, you need a different policy, which most people don't know, most investors don't know. You need a landlord's policy. And in order to do that, you need to find an agent. You can't just go online in most companies and buy insurance for your rental property. So A, you need to find an agent, and then you need to email him or her, or get on the phone, and that agent will ask you tons of different questions that for some of them you do not have the answer. A lot of technical questions regarding the property you just bought. And from that moment on, it will take two weeks until you get a quote. Now that's pretty crazy when you think about auto insurance. Two weeks. Because when you think about auto insurance or home insurance, that's pretty easy. You go online, you share some details, and you get a quote. But if you own a home and you rent it out, you don't need the net, it's going to take you two weeks. Why? Because the process is very manual, it's very non-techy, and it's been around like that for 30 or 40 years. So an agent will go to an insurance carrier and will create an application, sometimes going to be a paper application, but a lot of times it's going to be an email or just sent to a photon. And then an underwriter, on the other hand, will get that application, it's going to take three to four to five to seven to 10 days to review your property, sometimes ask for additional information, and you might get an answer. Again, within 10 days, maybe 14 days after you start the process. So it's honeycomb consuming, it's tedious, there's a lot of back and forth between you, the agent, the carrier, and at Honeycomb, this is exactly what we've set out to solve. So what we do in Inertial is we created this platform when you put your address, rent the property that you just invested in, and within five minutes, we can get you an online bindable quote. And the way that we do that is by deploying some very smart work that pulls a lot of third-party data on your property, combines some early imagery of your property, and cannot just provide you with a fast quote, but can also, what we call right-sized pricing, your quote by segmenting the list, can manage it in a better way. Maybe I can give you an example. Yeah, that'd be amazing. Yeah, because it sounds like it sounds super sophisticated, but... No, honestly, it does sound pretty simple from what you said so far, but an example would help for sure. Yeah, so we found out when we started, we found out that you can have two adjacent properties with fairly getting very different prices from insurance companies. Why? Because the way that they price insurance is very simplified. So let's say your roof type is different or whatever. It can really jump or increase your premiums. What we do, for instance, is we can tell right away if your roof is in an adequate position or not, and based on that, provide you with the high deductibles and the high price to do so. So by doing that, by leveraging all this small tech, we can provide you not just with a quick quote, but with the right price that will be a good fit for your property. Amazing. I mean, it sounds like such a no-brainer to start doing things this way. Has anyone tried to do this before? Or is anyone else just doing it? Are you guys the first? So I think we're the first that really took a tech approach. You'll see other companies who are more acting as agencies while trying to come in and say, hey, we need landlord insurance. We're going to help you and provide you with quotes from other carriers. What we do is we underwrite our own policies, and by doing so, we're able to provide you with a better price than most of the carriers that are out there. Right. And now I believe you're in a number of states already in the US. Is that right? Yes, correct. So we're in the Midwest and West. Mostly the biggest states are California, Texas, Illinois, Ohio, and Arizona, and some others, and we're expanding into the East. We've just opened doors in Massachusetts a few days ago, and New Jersey a couple of weeks ago, but our goal is to be almost within nationwide by the end of the year, covering 90% of the market. Amazing. Very ambitious goal. I'm sure with the model that you have, you can definitely achieve it. Let's see. So can you tell us a little bit more about the AI model and the computer vision that you're using? I think that's very fascinating. Just updating this industry that's been around for a very long time with a more techie approach. It would be cool to know how it works. Yeah, and so that's not my domain of expertise. And I don't want to disclose. It would be over my head anyways. Yeah, just disclose that the secrets are a little bit. Think of the process of obtaining insurance. So if you're an underwriter working in an insurance company, you're doing the same top of the world for almost two and 15 years. You're getting a quote and then you open up Google Maps and you try to look at the property from different angles and that picture that you're looking at is not updated. It's five years ago and the roof that you're looking at might be very different than what it is today. And then you're trying to get some reviews on the properties and finding some more information. Sometimes you get images, sometimes you get pictures from the agent who submitted the quote, which is also very time consuming. Imagine agency throughout the US are going to decide to the property to take pictures and then to attach them and something with the quote. That's crazy, right? 2023. But that's it. I'll go. And then you need to make a decision whether or not you want to cover without coverage for that property. So what we do is we take this process and bring it into 2020. We use visual imagery from a number of sources. We have third party data and altogether we have this algorithm that at the end of the day, it's not just saying it's a good list or bad list, but also take all that gray part and try to find the right coverage at the right price for a given property. And that's something which is super innovative, super unique. And we have yet to see any carrier, especially the traditional carrier that have been around for decades or hundreds of years trying to do so. Moreover, I would say that we see a lot of carriers and a lot of customers complaining that carriers are walking out on specific stage because that's a niche market. Being a niche market, selling a niche product, a lot of the carriers tend to just walk away saying, hey, we don't want to do habitation and I don't know, residential properties. We'll just focus on all mourners and auto. And that's one of the reasons we felt there must be a better way to do that. I agree. I'd also like to talk, just take a step back and talk about the market as a whole. I think you did mention that in some cases, people might not be as educated as they should be on the different types of insurance that they might need, like HOA compared to a condo or homeowner or something like that. So do you think there's a lack of education around insurance? Yeah, 100%. So when I started almost a year ago, my background is mostly with marketing, is to walk with the consumer company, different vertical. When I started, I did what everyone else would have done in search online, unannounced insurance, probability insurance. I didn't get a lot of data. A lot of the data that I saw back then was mixed living or just in general, very short in terms of content. And this is basically what we see from an educational standpoint or wellness standpoint. So a lot of homeowners buy a secondary home, move out from the home and keep the homeowners coverage because it's just a home, right? They need coverage, but they know that the coverage is not right for them. So landlord insurance is not like a homeowner's insurance. It's not the right fit. It's not the right price and so forth. You'd be amazed by the amount of people who switched over to Ironycon. And I'm guessing other companies as well, having homeowners insurance for an enterprise within four years, they find out they have the wrong coverage. And if God forbid they need to file a claim, the insurance company would come in and say, you have a homeowner's insurance, you are leaving that home. So we can't accept that claim. So the huge misconceptions on the property of insurance. Paying for an insurance is not even going to work for them. It's not going to even work for them. That's number one. That's like problem number one that we see again and again. Problem number two is that people just think of insurance as just an even necessity that needs to be paid and there's no good options out there. They're working with the same carrier, the same agent for years and they don't show up. I've heard that again and again and again. You can't save on insurance. You just need to add a customer saying once, I just thank you, I don't care. I just know I need that. I don't want to think about it too much. I don't want to think about it. Having said that, the insurance bar, if you think from an investment standpoint and improving in a while, all of these metrics is a big pot, sometimes 20%, 30% of expenses every year. When you go on bigger pockets and a lot of these sites, you get so much information. You're basically bombarded with information around deal analysis and short-term rentals and the bell-multiplex and creative finance and so forth, but you don't hear anything about insurance. It is boring, I agree, but most people, most investors, and I'm talking about heavy investors with dozens of properties, they don't know anything about insurance. Because they've been accustomed to this sort of method where they just renew every year. Some of them come to Honeycomb when they get a non-renewal for no good reason. Some of it because carriers are walking out from different states. But basically, there is a big shortage of knowledge amongst investors and property managers and property managers when it comes to property insurance for rental properties. What do you think the reason is that people aren't shopping around? Is it just because they know that it's going to be another lengthy process, it's going to take a lot of time, and it's just not worth it for them in the beginning? Yes, you're right. Because if you have a property for 20 years and you've tried one agent, maybe two, and you say, okay, I know how it's like, I know what the carriers are, they're not familiar with Honeycomb while the new carriers are trying to stop the market. So they just continue with renewing the same policy year after year. On the bright side, we do see a wave of new investors, especially the one are you familiar with the fire movement? Financial independence. Exactly. So there's a new wave of investors who like to do things on their own. They shop around for properties on their own. They read a lot. They watch and listen to your podcast as well. And they don't just go and say, okay, I need insurance, I don't care. Let me have it. I just need an agent. So they do shop around. And they do sign Honeycomb and sometimes other providers. Right. You're right. Yeah. And I think that's, it's just a habit that people need to get more and more into. And you see that a lot in the insurance, in like advertising and the marketing that they're doing for many different companies, right? Shop around, there are better deals out there. You can save money. But it's just, I think people not thinking that it's worth the time and the effort to start looking around. Absolutely. And they don't know. They don't know. Yeah. All right. And then, you know, I'd also like to talk a little bit more about, you know, the different types of insurance because there are different sides to it. There's, you know, the landlord side, there's the liability side. So maybe you could tell us a little bit more about that. Yeah. So basically, if you, if you, if you'd like a basic, clean and load policy, it's based off, based out of two components. One is the property, which is basically how much, it's basically providing coverage for your property against different types of damages. Wind, hanging, fire, and so forth. That property, I mean, I can go into length about that, but that's like, that's like basically the gist of having your property being covered. The important thing to notice here is that unlike homeowners policy, it's going to cover the dwelling, the structure itself, what's called, calls out an insurance. It's not going to cover your personal property, which is probably not there to rent out the apartment or appliances or so forth. So in most cases, you'll see renter buying renter's insurance to cover personal property and then the landlord buy landlord insurance. And both together provide the coverage that a landlord would need. The most important metric within this part is the replacing cost of building limit, which is very confusing for a landlord. And that's basically the amount of insurance can be paid to rebuild your home in case of a total loss. And the reason I'm saying that, that's the biggest component of the tax premium for on this type of insurance. Why that's so confusing? Because let's imagine that you come and you invested in a ground and bought a product of 160k. The market was down, you took the opportunity and bought a single-sharming home for 150k. But now then with the integration and amongst other factors, it will take 300k to rebuild that property from bottom up. And that's kind of like a crazy thing to think about it. Okay, I just paid 150k for the land and for the dwelling, but now I need to cover it, provide coverage for 300k. Right, there's a lot of adding costs. There's a lot of adding costs and a lot of lenders are having a hard time understanding that. That being said, most companies will ensure you actually place them because the building limit, calculation and not your market value on that property is in really bad shape. So that's the first part, which is I would say 80% of your insurance premium. The other part is the liability. Very similar to other types of insurance, if you have a friend coming over, slips in file and then still you as a landlord, you need coverage with the care of that. And that would be the general building section, which is built in within the policy. So basically when you buy landlord insurance, you buy property coverage and then you buy well-built coverage. Together that provides the protection that you need as a landlord for your property. So how is the landlord, or sorry, the liability side, how is that calculated and what's usually the limit on that? Does it depend on the property or the use case? So that's a good question. I don't think there's all the fun for that. So some companies put $300k as a standard. We went out and put $1 million, which we think is the right amount for coverage. A lot of the time they say, are you familiar with umbrella insurance? Umbrella insurance, yeah. So a lot of the time what people do is they buy landlord insurance and they put an umbrella coverage on top of that to provide more coverage for liability. So what we've done is we took that policy and instead of putting $300k, a lot of the times it saves a custom amount of trouble and money getting an umbrella coverage on top of that. Amazing. I mean it does sound like a good alternative. Yeah, and there's no right and wrong there. You go and learn and for different discussions around liability, the best answer that you will get from insurance specialists is, that the highest you can. So some will say $1 million, some will say $2 million, $3 million, $4 million. It's only based on your tolerance for it. All right, that sounds good. I'd also like to talk about maybe some of the other challenges that are there on the market. Yeah, absolutely. So I think the biggest challenge with landlords, mostly the ones that own single family rentals, is really that building limit that I mentioned before. And that's the amount of coverage that the insurance company will pay in case of a total loss. And if you go back to the example before, you might have bought a home for $150k. Now we as an insurance company ask you to buy coverage for $300k. And most landlords will say, no way, I'm going to, they're ripping me off, they'll ask me to buy coverage that I don't need. In the case of a total loss, I'll just sell it and exchange it with a $150k, but that's rarely the case. That's rarely the case. And the biggest challenge that we see with landlords asking for what we call market value, or what's called market value, they just don't understand the importance of insurance. And they might think, hey, that's not going to happen to me. But again, in the case of a total loss, they can sell the rent for $150k in most cases. And they're probably going to pay tax for doing so. So again, that just loops back to the lack of knowledge, because the differences in buying a $150k coverage and $150k coverage are not huge when you think of the investment that you put in to buy that talented property. Now on a broader perspective, I think one of the challenges that we see with landlords is that some of them do not see the investment that they put as a business. So I just have another home that I need to come to. It's a mindset. It's a mindset, right. So if you own 50 single family homes, that's a business. But if you own one or two, is this something that you put your money into it, but you don't think about it as a business? And I think you probably talked about this on previous episodes about how being a short-term rental investor is kind of like being a hotel owner versus a real estate owner. A different business, yeah. It's a different business, and you need to change your mindset. And that's exactly the way I see it. And I think that's the biggest challenge that we see with landlords. And I think that's the biggest challenge that we see with landlords. It's a different business, and you need to change your mindset. And that's exactly the point now to get the mindset of I don't own a property, I own a business, and I need insurance for that investment or that business. It's not just a home that I bought and I'm trying to save on insurance. It's a business. An investment I put in, you probably took a mortgage, 30 years mortgage for that, and you need to protect your investment. And I think that's the biggest mindset that landlords need to change. And we see that over and over again within the insurance pay. Wow. Yeah, I mean, there are so many nuances, obviously, with buying insurance. It sounds simple enough, but once you start getting into it, there's a lot of factors that you need to look at. So where can someone go to really get educated more on this topic? Everyone has a different case. Yeah, so it is simpler than you think. So I think that buying landlord insurance is easy as buying homeowner insurance. And even, we do not ask many questions. The homeowner is curious about that. So we really try to make things simple and gather a lot of information, again, from self-party data and other sources. And really ask the questions that we need. From a coverage standpoint, but mostly, so on the coverage side, we do tend to provide the right coverage, the small coverage for your property. Having said that, we developed, I think there are more than 100 pieces of content on our site regarding landlord insurance and con association insurance. Anything from simple deductibles to win and held deductibles, to slips and falls, liability claims, and what have you. More than 100 pieces of content. And I welcome everyone that is able to visit and be more educated. I know it can be very technical, especially if you go to the special side, but we've tried to do a very good job in really simplifying these terms to make everyone understand that. I love that. I mean, because obviously, the solutions are out there. It's just about people knowing where to look, what they need, and how to sort through all the information. So I love that you put that all out there and just made it simple to understand. All right. So I remember before we came on here, you were telling me about this story of this investor that you were working with, and he had many properties, but maybe they weren't so well covered insurance-wise. I'd love to hear more about that story. Yeah. So obviously, we're not getting into specific locations and so forth. That's, again, it's about the idea of educating investors and having them more knowledgeable about insurance. So we had an investor coming in. He's been owning more than 40 properties, roughly in the same location, with the same agent, and his policy was just all about it from a conflict standpoint. And he didn't put the effort in there. I'm talking about thousands of dollars to pay for it. So without going into specific technical things, even if you own 10 or 15 properties, you need to understand the coverage that you need for each property and bundle them together. There are different ways for insurance companies to create different levels of coverage. And most people were not in the insurance space, don't understand that. So in this specific case, an investor comes in with 40 properties, he's basically being covered with a lot of money every year to only get covered for 50% of his property. Wow. Yeah, 50%. And that's also not an easy conversation to have with an investor. Again, it's not the nicest thing that you can say, but I think, again, it goes back to the importance of being properly insured, what we call insurance to value. Insurance to value? Yeah, insurance to value. Again, I do not know, I think 10% of that investor's real estate knowledge that drove him to become an owner of foreign properties. But in the end, if you would invest some of his time, understanding insurance more deeply, I think that would be saving money and providing him with a better solution for covering his investment. Wow. So did he ever have to take out any insurance or make a claim while he was underinsured? So when I looked at it, it wasn't our policy, obviously, we weren't selling these stuff. But again, as human beings, we tend to think that it will never happen. But it happens more than you think. And what it does, you want to make sure that you're getting the right coverage. And a lot of people tend to think they have the right coverage, but then when they file a claim with property claims on like part of all the special types of classes of insurance, things get more complicated. You're not going to be paid within 48 hours. The process, it's going to take a couple of months, you need to speak to an adjuster, adjuster or an engineer will come and visit your property. And then they're going to open your policy and you need to make sure that you know what's going on in there. Otherwise, you're going to have a lot of issues and might even pay out of pocket or for damages that accrue to your property. It's devastating when you've been paying for your policy, which you thought was right for you for years. Absolutely devastating. Absolutely devastating. And again, most people, most human beings, not with property insurance, I think it will never happen to me. So I can save on my insurance. You don't have to buy, by the way, you don't have to buy landlord insurance, right? There's no law or anything that requires you to buy landlord insurance. But if you're on a mortgage, yes, you will need landlord insurance. And most cases that if you own a property, you better buy insurance without a lot of money compared to the investment that you put in. And a potential downside. Absolutely. If something goes wrong. Yeah, that's true. Wow. All right. I've pretty much covered everything that I want to ask you. But now I want to give you the floor and see if there's anything else you'd like to mention the service that you guys provide or education around insurance within the market today. So go for it. Yeah. So without being too serious, I will say that if you own a rental property, go and check out Honeycomb. It's super easy. Takes less than five minutes. If it's not the right property for us, it's out of our escapita, you know, within five minutes. You don't have to wait. You don't have to find an agent. You just quote it and check out our rates. Regardless to that, go and understand the coverage that you need. Understand what building limits stands for. I think that that would be probably the most important metric that I would focus on. If I were to get coverage for an investment property of mine and most importantly, shopping out, there are more options that you tend to think on most areas. So if you live in a coastal area, in Shrol, yes, you might get tons of options. But if you live in a city, yes, you will get multiple options depending on your business. Wow. I love that. The more educated you are, the more informed you are about your decision, the easier it'll be. More options you have. It's a lot of money. A lot of money at the end of the day. People tend to overlook it. It's a lot of money that you can say. Wow. All right. I think that's everything. It's been a pleasure speaking with you, Barak. I really enjoyed it. I feel like I learned a lot. There's a lot of misconceptions that I walked in here that I already had. And you really cleared many things up. And if I want to brush up on any more knowledge around this topic, around landlord insurance or insurance in general, I'll be sure to check out Honeycomb. But with all that said, thank you for being on the podcast. And for having me with the playing loan. Amazing. All right, guys, that wraps up today's episode. Thank you very much for watching. If you're interested in checking out any of our other episodes, then just check the link in the description and we'll see you next time. Thank you. Thanks for listening all the way to the end. Don't forget to give us a good rating on whatever platform you're tuning in from. And we'll be back soon with another new episode. We hope to see you there. And until next time, this has been Hoop It In.