Table of Contents - Rental property insurance 101 with Kyle Melko
George El-Masri [00:00:00] Today, I met with Kyle Melko, an insurance broker with Acumen Insurance. He is somebody that's worked with a lot of rock stars in general. And by rock stars, I mean like people that work with her brokerage. He does a lot of student rental properties and he's a specialist specifically with investors. So that's why I was somebody that I decided to to have on the show. You'll see that there is actually quite a few little things to pay attention to when you're getting quoted for your property insurance. These are some of the things that we discussed, some things like sewer backup, vandalism, things that your tenants might do to the house. So different companies will offer different options there in that situation. So I just wanted to make sure that you guys got the most out of property insurance, hopefully you'll enjoy. And reminder, if you know someone looking to invest in their first, second or third property, I would love to help them out. It would be my pleasure to take care of your referral. So keep me in mind, you can look for me on well-off Nazia or George Attwell off duty. And I look forward to helping your family and friends. Welcome to the Wealth podcast, where the goal is to motivate, inspire and share success principles. Today, I'm here with Kyle Melko, who is a commercial account executive, works with Acumen Insurance Group. And what they do as a company, they offer specialized in affordable insurance solutions for building owners, property managers. And a big focus when they started was student rental properties. And now they work with all sorts of investment properties. They are specialists in that field. He joined in twenty fifteen and he actually designed a program specifically for student rentals at the time. He's also a member of the Hamilton District Apartment Association. And Acumen is actually a full service brokerage, which is interesting because I know in real estate we discuss those terms. And I wanted to start off by asking you what that means as a as an insurance brokerage to provide full service.
Kyle Melko [00:01:54] Yeah. So basically, we're we've been around for about 40 years. There's 30 to 40 employees in our Hamilton office. Everyone kind of does their own thing. They have their own specialty, myself and a couple of people on my team. We do the real estate, student rentals and things like that. But we also do your standard home and auto insurance, commercial insurance, life insurance, financial services, everything like that as well.
George El-Masri [00:02:19] So cool. OK, so that's what you mean by full service. That's good. Well, first of all, welcome to the show. Thanks for coming today. I wanted to do the usual. So you said you've heard some of the episodes that I start off by asking about your childhood. Yeah. Yeah. Can you tell me a bit about where you grew up and what that was like for you?
Kyle Melko [00:02:36] Sure. So my parents split up and I was very young, so I kind of split my time between the Rossdale area and Hamilton as well as out in Benbrook and Stony Creek a bit. So I grew up on the Hamilton Mountain and Benbrook a bit played my sports out and Benbrook and then also spent some time down with my dad down in Rosedale. So it's a nice balance of kind of the whole city. Cool. What sports were you into? Played some hockey growing up as well as in baseball and golf. Big of, uh, person.
George El-Masri [00:03:10] Cool. Do you still play?
Kyle Melko [00:03:11] Still play. It's nice having the ability to play, uh, especially getting into insurance. So it's nice to get out and golf with some clients or some charity tournaments or things like that.
George El-Masri [00:03:23] Do you play the other sports as well?
Kyle Melko [00:03:24] Still play hockey once a week. I try not to hurt myself when I'm out there and up until recently played softball as well, just with some family and friends.
George El-Masri [00:03:32] OK, cool. That's great. OK, so you grew up in a split a little bit between the mountain and Benbrook. Right. And where do you currently live?
Kyle Melko [00:03:41] I live in Mount Hope. I mean, my wife and my daughter out there and I've been there for many years now.
George El-Masri [00:03:47] All right. Good for you. How did you meet your wife?
Kyle Melko [00:03:50] I actually met my wife. I worked at the one of my first part time jobs is working at the arena, and she also worked there. So crosspost that way. And I kind of knew her family bit played hockey with her brother. And it's been 13 years now, so.
George El-Masri [00:04:03] Oh, cool. So when you say you're in the hockey arena. Yeah.
Kyle Melko [00:04:06] At the hockey arena and Glenbrook there. So Glenbrook
George El-Masri [00:04:08] Arena. OK, good for you. Yeah. So you've been married. How long now?
Kyle Melko [00:04:11] I've been married for five years. Just five years last month. And we have our daughter now, she's ten months old and so yeah it's fun and exciting times. Good.
George El-Masri [00:04:21] All sorts of good things are happening. Yeah. Yeah. OK, so tell me, how did you, did you think about like where you always kind of interested in rental properties or how did you stumble upon this insurance sort of field and and career.
Kyle Melko [00:04:35] Yeah. So I actually went to school for insurance at my college. I have a two year program there and basically it's all the education you can get when you start your career, but you can do that before you start your career. So there's I think it's ten or twelve classes on various courses, no different than what you guys have in real estate. The different courses get some certifications and things like that. So I did that for two years, got interested in that about grade ten or eleven, had a family friend who is an insurance and it wasn't sure I knew. I want to get into the business world and insurance seemed to be very specific, which I liked. And the program at Mohawk actually is one hundred percent employment rate. So I knew I'd be guaranteed a job when I got out of school. And then from there I kind of looked into a few different careers. I found the broker world liked the kind of lifestyle it allowed for, you know, if you can be disciplined and and stick to what you need to do, no different than in the real estate world, it gives you the flexibility to also do some things that's tied to your desk. Nine to five. You can be out seeing clients and doing different things and kind of build your own business.
George El-Masri [00:05:42] So, yeah. Interesting. OK, so you went to Moha College to get your degree, but what about someone? Do you have to have some sort of degree to get into insurance?
Kyle Melko [00:05:51] I have my broker's license, so you have to pass a broker's exam.
George El-Masri [00:05:54] Yeah. So what, anyone can take that exam I guess. Yeah. You don't need to have a degree from a college or university.
Kyle Melko [00:05:59] Do you know the majority of people in the insurance world. Typically they. Have some sort of business degree or they come from some sort of field like that in the you find in the Hamilton area anyways, that a lot of people have done the program just because it's offered at the local college. But you don't it's not a prerequisite to to get into the insurance world. Seems real estate, you know, anyone can go and write their real estate license. There's no, I guess, formal real estate degree. Right. But one thing leads to another. And I stuck with it and have a diploma and insurance of my Canadian accredited insurance brokers designation as well.
George El-Masri [00:06:37] So great. OK, was there any sort of advantage to getting your degree for Mohawk?
Kyle Melko [00:06:43] It basically allows you gives you a little bit more ground. When you're looking for a job, you have it kind of a special education, especially getting into the broker world. Not a lot of places are willing to take a place on or take a risk on someone that has no insurance background and they want to go out and start selling insurance. So that's the advantage that gave me was it gave me the a bit of an insurance background and also prepared me to write the broker's exam
George El-Masri [00:07:11] to insurance brokers, get paid a salary or is it purely commission
Kyle Melko [00:07:15] based? It's a mix of both. So there are there are salary brokers out there myself. I work on a commission basis and there's pros and cons to both. The salary gives you a little more stability. Typically, there's not as much upside to increase your income. They have their sales expectations for the year and probably some service expectations as well.
George El-Masri [00:07:37] So, yeah. All right. So tell me, when you first got your your insurance license, I guess, how did you go about finding clients?
Kyle Melko [00:07:47] So how I started was basically doing home and auto insurance. It's typically where a lot of young brokers start because it's fairly easy to to get your feet wet doing that. And then from there, I knew that I want to expand into the commercial side, but can be a little overwhelming at the beginning. So I decided, well, I know how property insurance works. And going to my college, I had some some friends that were living in student houses and that kind of intrigued me as well, because the insurance for this, because your standard homeowner's insurance market won't cover student rentals, student occupancy. So one thing led to another. And how I initially started was going on all the schools websites that all their listings for their student rentals and just reaching out that way to people and saying, hey, I'm starting to specialize in student rentals and we have some great grades and good coverage and things like that. And that got me started as well as actually, Paul, the Ruso was, I believe it was his first rental property and it was one of my first student rental policies. He kind of we connected out of the blue. That's about ten years ago now. And I did a policy up for him and that went well. And from there, I kind of got some confidence going. And he connected me to a few other investors and things like that. And I left the industry for a bit a couple of years, not the industry. I left the broker side for a couple of years. And then when I came back, we reconnected. And from there it's it's snowballed from there.
George El-Masri [00:09:21] So interesting. OK, I Paul's Paul's an agent in my office at Rockstar Real Estate. He's everyone at Rockstar. It's pretty much where all investors and work with investors. So that's cool that you got started ten years ago. And what did you do when you took your break?
Kyle Melko [00:09:35] So I actually went to work for a sports insurance company as an underwriter. So for three years I worked. We handled a lot of the national sports associations, a lot of the Olympic athletes, all amateurs. I didn't know professional athletes or anything like that, but all amateur athletes, anyone from your local curling club, all the way up to National Rowing Association, things like that.
George El-Masri [00:10:02] So so what is that? What do you do? Do you ensure the athletes themselves?
Kyle Melko [00:10:07] Yeah. So we're covering the liability of the association as well as the athletes from an injury standpoint, it's like that.
George El-Masri [00:10:15] So to replace their income, if they get injured or something like
Kyle Melko [00:10:18] that, well, you don't see a lot of income typically on the amateur athlete side. Yeah, but what you see is just they need the the physio, the rehabilitation to get back to being an athlete. So a lot of them sacrificed their time and they're working up to the Olympics or world championships. So they need to be able to train and compete for those things.
George El-Masri [00:10:40] Got it. Interesting. OK, and you can't you come back, you decide once again to to specialize with investors. And at this point, what so I know you've told me a little bit about what kind of properties you work on, but you'll do pretty much anything that investors own, right?
Kyle Melko [00:10:58] Yeah. So what we've seen popular lately is a lot of the legal. Second sweet stuff, so we have a nice solution for that and we're seeing a lot of creative stuff as the the market gets harder and harder to invest in. And investors and real estate agents need to get a little creative to to make things work financially. We're evolving as well to come up with solutions for that, as well as your standard policy for things like student rentals, investment properties, apartment buildings.
George El-Masri [00:11:30] Yeah, you talked about how you specialized in student rentals when you first started. How is a student rental policy different from another rental policy for like a single family home, for example?
Kyle Melko [00:11:42] Yeah, so most standard insurance markets that do rental properties, they don't like when there's unrelated individuals sharing common areas, things like that, as well as higher occupancy volumes for houses. So and typically in our world, when insurance companies don't understand something, they they just don't want they're not interested in it. So what it takes, just like any industry, is someone to specialize, to take the time to understand it, find out the information they need to know and develop policies and programs to to handle these special types of risks
George El-Masri [00:12:16] for you on your Web site, it shows that you designed a program for student rental properties. Can you tell me a bit about that?
Kyle Melko [00:12:22] Yeah. So we started off with a few and we got some traction with that. And from there, we were able to kind of develop a package that covers any of the big concerns, as well as some smaller things that what I don't see with other student rental insurance markets, things like allowing for extended vacancies during the summer months and things like that. So basically, just like any other industry, when you when you specialize in something, you tend to pay more attention to the smaller details and allow yourself the ability to kind of develop better products for customers that every broker has access to student rental insurance coverage. But what I find is they either take a long time to get back to people or the policies aren't as great as what you could be getting somewhere else. So when I started specializing in it, I found that I could offer efficient response times as well as great coverage. So it's a good solution and it's a win win on both sides.
George El-Masri [00:13:29] OK, yeah. So like you said, every every brokerage pretty much has access to student rentals, but a lot of people just don't understand or a lot of insurance brokers don't understand the coverage. Just like, for example, in real estate, your typical realtor may not truly understand an investment property. Exactly right. So it's kind of the same sort of thing. So you specialize in that area. Can you tell me some of the things that we should be looking out for? Let's say somebody is interested in buying a student rental. Right. What are some of the things from an insurance standpoint that we should be looking out for?
Kyle Melko [00:14:03] Yeah, so the biggest things that I would say you need to pay attention to are water damage limits, sewer backup limits, rental income limits, any exclusions in regards to vacancy permissions, things like that. So in regards to vacancy permissions, your typical policy rental property policy will allow for usually 30 days vacancy. They understand from time to time you're going have some challenges trying to find a tenant. There's going to be a few weeks here and there where the property is empty, whether you're doing some small renovations between tenants, things like that, where we have a solution, where the policy will allow one hundred twenty days understanding that school ends in April or May, students may not be in there till September. The coverage is a little more limited during that time, but you still have the policies not going to deny a claim. And with respect to no one being there for 30, 60, 90, 120, up to 120 days. So the biggest thing that I see nowadays is in regards to water damage and sewer backup. So what I see is a lot of clients as well as brokers don't understand the amount that a claim may go to in regards to water damage. I policies that have fifteen thousand dollars back up when we're seeing sewer backup or water damage claims in the twenty five thirty forty thousand dollar range.
George El-Masri [00:15:25] Can you can you speak to that a little bit and explain what you're like specifically when it comes to sewer backup. How could damage a property and what not.
Kyle Melko [00:15:33] Yeah. So the most common claims we see are water damage. So a burst pipe is the most common or sewer backup. So whether the typical students aren't maybe as keen on making sure drains are flowing properly or there's an influx of use on the showers, just the infrastructure in the house in general. So when something like that goes wrong, typically it goes wrong pretty quick and water is going to get into every area at. And as quick as possible, so what we recommend to all of our clients are things like backflow valves, having the drains inspected regularly and just taking a proactive approach to it, because obviously you have insurance, but it can cause quite a nightmare when you're trying to relocate multiple students or if it's during the school year, if it's in the winter, it just causes a nightmare for for the landlords or property managers. So we always recommend to our clients to kind of take a proactive approach, spending one hundred fifty dollars or two hundred dollars to get your drains scoped or even just using a drain cleaner to make sure the drains are flowing regularly or even just educating your tenants a bit, especially the students and and saying, hey, you know, let's make sure that we're not putting stuff down the drain. So let's make sure if there's any issues, you if you encounter a change in water pressure, things like that, those are indicators that there might be an issue with the water lines. If you can address those issues quickly, typically the sooner the better in regards to avoiding something massive, like a basement, flooding or things.
George El-Masri [00:17:08] Yeah, right. And from my understanding, I might be wrong here, but I remember hearing this somewhere that basically if there is like heavy rains for whatever reason and the city sewers are really full, then in that case, some of that water might come back into your house. Absolutely. And that's where you might have some flooding in your basement potentially.
Kyle Melko [00:17:28] Yeah. So what we see, especially in a lot of the cities that have post-secondary facilities, Waterloo, Hamilton, the infrastructure in these cities is is getting extremely old and it doesn't handle the influx of rain or water from from the weather events that we're seeing the last few years. So that water goes somewhere. And typically what it does is it back flows back into these houses. In that case, from insurance standpoint, that's a sewer backup loss. And personally, myself, I try not to sell a policy with less than a fifty thousand dollar limit
George El-Masri [00:18:01] because it doesn't make that much of a difference on your policy, right?
Kyle Melko [00:18:04] No, I think the cost for that is about 50 bucks a year. Yeah. Yeah. So even if you want to pump that up or if you're trying to save money, that's not the area where I would try to save money on a policy that's, like I said, probably the most common claims we see nowadays, sewer backup or water damage.
George El-Masri [00:18:20] Right. And then so what you're saying is that if let's say you have, I don't know, carpeting for whatever reason or laminate floors in a basement. Right. And then now that flight, that floodwater comes in, it's going to destroy the floors. It's probably going to destroy whatever else is down there, like your bathroom cabinets and if you have a kitchen or whatever. So that's why you're saying that fifteen thousand may not be enough to to rebuild or restore some of these items.
Kyle Melko [00:18:46] Exactly. So what we use as a general guide and this has been provided by many of our insurance companies, is about twenty five dollars a square foot for finished basement and five dollars a square foot from the finished basement, because once the water gets down, they're going to go two feet up the drywall to replace it. But what we're seeing is to maximize the the value of these properties is the basements are finished now. There's bathrooms down there. There's typically even kitchens. It's a it's a fully furnished area. So you're looking at at least in the range of twenty five dollars a square foot. So if you're trying to do some quick math to see if you have a sufficient sewer backup limit, I would use a value of twenty five dollars a square foot. So some of these houses you're we at maybe eight to a thousand square feet in the basement. So right there you're at twenty five thousand if you were to have kind of a total loss in the basement.
George El-Masri [00:19:38] So that formula only applies to the square footage of the basement.
Kyle Melko [00:19:41] Yeah, for the basement. Yeah. So generally for a house you need to be at at least two hundred dollars a square foot. The national building average, the last time I checked is about one seventy five. I think that's a little low because you also need to account for things like debris removal, professional fees. There might be some bylaws to come into play. There's coverage for that as well, especially on the older homes in regards to how they can be rebuilt and things like that.
George El-Masri [00:20:07] Yeah, when you get an insurance quote, it's like 10 pages of all sorts of stuff. Right. What are some of the things to look out for other than the sewer sewer backup?
Kyle Melko [00:20:18] Sure. So the the easiest way to assess a policy is probably to go to the exclusions. That's where I like to make a good policy, is going to say we're going to cover everything unless it's excluded. That's the easiest way to look at an average insurance policy. So what I like to do, especially up front, especially when I send quotes to people, it's kind of go over, OK, what's not covered and is this a concern for you? And is there a solution to have that covered or how can we mitigate that away from from that being a huge financial loss out of your pocket? So things like the sewer backup typically has a little bit of a higher deductible because we see a lot of those claims. So that could be the difference. Yeah. So you could be saving one hundred and fifty dollars compared to some. Analysis, quote, But their sewer backup deductible might be five thousand. So now in the event of a claim, there's twenty five hundred dollars more or four thousand dollars more that you might have to pay out of pocket. But beyond that, your student rentals industry standard is typically to exclude cooking in rooms. So they want to see the cooking being done in a equiped area, the kitchen. They want to see hot plates and rooms, things like that. Seepage and seepage and leakage is another big one. The industry is evolving and we are starting to see that covered. But it is something to be aware of. So especially if you get into an older home, you may not be fully aware if there might be a crack in the foundation or some some areas that leak typically that is excluded on rental properties or student rentals as well. So something to be aware of, something to inquire with your brokers as to whether seepage and leakage is covered, because that can be pretty drastic damage to a basement that's finished as well.
George El-Masri [00:22:03] OK, so can you tell me about that? Let's say you have a rental property and there's some water coming in, right? It's not major, but it comes in through the foundation. Right. And you have that coverage. What what would the insurance provider do for you?
Kyle Melko [00:22:16] Yeah. So it just responds like a normal policy, no different than having, like, a fire claim or water damage claim.
George El-Masri [00:22:22] So they might feel the crack in the foundation or something. Yeah. They're going to waterproof your basement.
Kyle Melko [00:22:28] No, and that's the biggest thing. The biggest. I think one of the biggest misconceptions people have with insurance is not to get off track, let's say a roof claim. People have a few shingles fall off the roof and they expect their whole roof to be replaced as opposed to what was only the damaged area. So basically, the principle behind insurance is that they're going to return you to the same place you were before the claims. So or help you prevent or repair what's causing that issue. But typically, it has to be something that's sudden and accidental, doesn't cover wear and tear or maintenance on properties.
George El-Masri [00:23:01] Yeah, yeah. I see.
Kyle Melko [00:23:02] That's the easiest way to look at it. Something sudden and accidental has to happen to cause a loss. And then typically your policy is to respond to that.
George El-Masri [00:23:10] Is it worth even making claims for small things like a few shingles on the roof or like a small crack? I'm not talking about a major crack, but small where they might just inject it or because first of all, there is the deductible. And then I think after a certain number of claims, you, like, pretty much get blacklisted from the insurance company. Right.
Kyle Melko [00:23:29] So you want to you definitely want to avoid any small claims, if it's possible for you to absorb that loss yourself. One claim is typically not a big deal. But if you get into multiple claims in, say, three to five year window, it's going to be more challenging and more costly for you to obtain insurance. Yeah, so you always want to. And that's why it's best to always deal with a broker who can give you that advice. So you always want to take into consideration your deductibles, maybe if you've had a claim in the past or or what the case may be in regards to that. So, you know, if it's going to be fifteen hundred dollars to fix your roof and you have a thousand dollar deductible, to me, it's not worth the risk that you might have a more substantial claim in regards to maybe a sewer backup or water damage or maybe a massive roof damage in the future might be worth your while just to pay the additional five hundred dollars out of your pocket.
George El-Masri [00:24:23] Yeah. So really, what your insurance is there for us, for anything major. So maybe do you ever recommend to people to like I don't have higher deductibles on the smaller things like a minor or a few shingles flying off. I don't know if that you can customize your policy like that or
Kyle Melko [00:24:40] so I always the conversation I always have with my clients is especially for the new investors, is what's kind of your threshold in the event of a claim. So sometimes you have investors that are very handy themselves. So they say, hey, you know what, I'm comfortable with maybe a twenty five hundred or five thousand dollar deductible because myself or my husband is very handy. He could do a bit of drywall work himself. He could go up on the roof and fix a few shingles. But if you're selling, you're more of the hands off investor where I myself especially, I'll be the first one that I don't know and I'm not very handy at all. Right. So if I was an investor, I'd want I might be putting in a smaller claim as opposed to someone who is handy because I don't know how to fix some drywall. I don't know how to patch a foundation or fix a roof. So I always try to ask them what's their threshold? Typically the new investors starting out, you're on a tighter budget. You don't have any capital built up or maybe like a little nest on the side to to account for that stuff. So you want maybe a lower deductible. You always want to weigh your options in regards to what's the savings if I increase my deductible. So if you can save ten or 15 percent by increasing your deductible fifteen hundred dollars or a thousand dollars, that might make sense because that savings would add up quicker. What you'd pay an additional deductible, if that makes sense, so right, yeah.
George El-Masri [00:26:06] OK, so slightly different here. But I know that for for car insurance, for example, there are certain discounts I could apply if you're a member of this or you have, I don't know, like I forget what the yeah.
Kyle Melko [00:26:20] There's like alumni discounts if you belong to certain associations. So there on the rental property side, I there's not much like that. Typically what we have is more of programs. So preferred pricing just for anyone who has a student rental or rental property. There's no in our office anyways. There's no specific discount for alumni. There is things like that with places like TD. Sometimes they have a lot of alumni discount,
George El-Masri [00:26:51] but usually someone on TV won't really understand all the things that a specialist broker would understand.
Kyle Melko [00:26:57] Right. So that's something you have to take into consideration, is that, yes, there might be some savings or there might be a discount, but what other value added services are you getting from that?
George El-Masri [00:27:13] And you have to wait on hold for like two hours any time you want to speak to.
Kyle Melko [00:27:17] Yeah. And typically you're going to get someone different every time. You might have to explain your situation every time. And you don't you don't develop that relationship with the person.
George El-Masri [00:27:26] Yeah, it's it's pretty bad. For my first rental, I was I had RBC Insurance because I think I was saving like, I don't know, six hundred bucks on the year with them for whatever reason. Right. But it was such a bad experience, not not to say anything bad about arbitrary, but absolutely. Just the fact that I had to wait on hold for so long to speak to someone every single time I had a question. Right. And like you said, it's someone different. So they're always looking at the notes of what happened. But with a broker, it's they know who you are. You have a different sort of relationship. You can reach out to them any time and you're going to get much faster response. It's more convenient. And they'll they'll work on your behalf to to get you a policy that works works well for you.
Kyle Melko [00:28:05] Yeah. So there's a couple of advantages. Dealing with a broker myself or a broker in general is that all my clients have my cell phone number. So if you have a claim or question in the evening weekends, I have no problem taking a call or getting back to you typically within a couple hours, if it's in the evening or off business hours. The other advantages, you develop that relationship. And as brokers, basically our mandate is to when we're dealing with the insurance company, we're working on the client's behalf. And when the insurance company is giving us information, we're we're kind of the middleman between the client and the insurance company. So you always kind of have that extra person on your side to kind of guide you through the claims process. Yeah, a lot of my clients have said that that's something they like is in the event of a claim kind of going to bat for them and maybe clarify some information or or just helping them, whether it's with the restoration company, an adjuster, if they're not getting the answers they like.
George El-Masri [00:29:06] So, yeah, for sure. When it comes to vacancies or property damage, I'm not talking about necessarily a student rental, but just a rental property in general. Are there any policies that cover those things like let's say a tenant just leaves overnight without warning, without anything in the house is vacant or if they damage the property?
Kyle Melko [00:29:26] Yeah. So on our student rentals and most of our rental properties, there is an endorsement that includes vandalism by tenants. Typically there's a small charge for it.
George El-Masri [00:29:35] But can you give me an idea of what what charges are?
Kyle Melko [00:29:38] So typically you're looking at about one hundred twenty five bucks a year or twenty five thousand dollar limit, and that's going to cover your any vandalism by tenants. So we don't see a lot of those claims, especially properties are so for the most part, well managed. Now they're monitored. So I guess it used to be an issue years ago, but now properties are much better managed than they were in the past.
George El-Masri [00:30:01] I guess that could be useful to someone who's taking on a property that's already tenanted. Right. It might be a little more beneficial for that for that purpose.
Kyle Melko [00:30:10] Yeah. So you never know how tenants are going to react or what they're going to do. They can be unpredictable from time to time as as we've seen in the industry. So it just gives you that cushion myself a quick math. Hundred twenty five dollars to potentially get paid. Twenty five thousand dollars for damage.
George El-Masri [00:30:27] That's only like twelve bucks a month.
Kyle Melko [00:30:28] Just yeah. It's like ten bucks a month, right.
George El-Masri [00:30:31] Yeah. Ten bucks a month. Sorry. Yeah.
Kyle Melko [00:30:32] So to me that makes sense, especially when it could be excluded and you could be twenty five thousand dollars out of pocket which could be crippling to your investment potentially. So.
George El-Masri [00:30:44] OK, what about vacancy.
Kyle Melko [00:30:47] So vacancy. That's something to always kind of have that conversation with your broker because each policy can be different as to what they allow for vacancies.
George El-Masri [00:30:56] I'm not talking about like if you're going to have continued coverage during a vacancy, I'm saying. Income replacement during vacancy,
Kyle Melko [00:31:03] yeah, so typically, if there's a lease agreement in place, that's your biggest friend in the event of a claim, is showing that either I couldn't collect this rent during that time because the tenant had to move out or proving that you had rental income that you or that you were losing during that period. So these agreements are always very good to have in regards to proving your rental income.
George El-Masri [00:31:27] OK, so but but that is an option to be added potentially to an insurance policy. Yeah.
Kyle Melko [00:31:32] Any any rental property policy. Sometimes they have a built in. Sometimes you have to add it. But I haven't seen one that doesn't cover that, OK. That coverage is a few dollars a month. So it's worth having on there.
George El-Masri [00:31:46] Yeah, it's a few dollars. But does it cover your full rental income.
Kyle Melko [00:31:50] So typically in the event of a claim you just have to prove what your rental income was during that time. So just goes back to the lease agreement and showing that. So typically they'll cover. And if you don't have a lease agreement in place, most policies will cover just your fair rental value of that property. So you kind of use like a general value from that area or is typically just a negotiation that goes on with the adjuster to prove they're not going to pay you ten thousand dollars. Yeah, for sure. Um, if the if the area is only getting a thousand dollars a month or fifteen hundred a
George El-Masri [00:32:24] month, so, so let's say there is property A which is rented for a thousand dollars a month. Right. And all of a sudden the tenants are late and now you're taking them to court to get them out. They haven't paid. It's been two months or one on. You have to follow procedures. So for those two months, that two thousand dollars that you're supposed to get, the insurance company would potentially cover that if you have it.
Kyle Melko [00:32:48] No, they'll only cover your rental income if there's an insured loss. So rents in arrears or tenants in arrears, things like that. Those things aren't covered under an insurance policy. They're not covered or not covered because there has to be goes back to the sudden accidental occurrence. So say, for example, there's a fire in your house and the insurance company says it's going to take us six months to rebuild this house. Yeah. So the tenant has to move out. Obviously, you can't collect the rent during that six months, so they'll reimburse you the rental income that you'll be receiving. So, yes, your rental income is coming in as far as you planned. And one other thing I want to touch on there, the importance of making sure your tenants have tenants insurances. If they have to move out during that six months, your policy is not going to cover their additional living expenses. So anything beyond what they're paying in rent. So typically they might have to go to a hotel or somewhere where the rent is higher. Their tenants policy would respond to cover that, but not your policy. So where we find where it gets a little tense between landlords and tenants is the landlord recommends that they have tenant insurance. They don't take it. Something happens where they need to move out for even something as simple as two weeks. And they're going, well, it's going to cost me an extra thousand dollars to live in a hotel. Are you going to pay for that? And they're coming back to the landlords are coming back to us and saying, is this covered? And it's not right. You know, typically we have that conversation with people, but it's something that there's always so much going on when you're writing a policy, they tend to forget that. So it's it's something lately that we've been making a really big push for is make sure your tenants of tenants insurance,
George El-Masri [00:34:34] let's say they do have it right. They've had it for a year. And then later on they choose, they decide, OK, I don't need this anymore. Yeah. And they cancel the policy. What would you suggest doing in that case?
Kyle Melko [00:34:46] So it's always best, usually on an annual basis, just to get them to provide you proof of insurance. OK, there's very little you can do to kind of beyond getting them to prove it every month, which becomes a bit of a nightmare.
George El-Masri [00:35:00] Yeah, but what if they don't want to like they say, OK, you know what, I canceled it. What can you do? Can you force them into getting content insurance?
Kyle Melko [00:35:06] My understanding is you can't just speaking to some some property managers with the landlord tenant board is you can't make tenant insurance mandatory. You can write it into a lease and kind of. Yeah, but you could also show them the advantages to having it to sing. So, hey, if we have a fire and you have to move out, you're going to be on your own for what you'd have to pay out of pocket beyond, over and above what your your rent would be. And if someone comes to the property, one of your guests or visitors and they slip and fall, you could be named in a lawsuit for a million, two million dollars. So you can and a broker can help you with that because typically they can provide tenants insurance as well. So you can say, hey, I have I have someone who can take care of you. It's typically inexpensive, maybe twenty dollars to thirty dollars a month, depending on what kind of covered you're looking for. But it's typically should be part of a good lease agreement. As we said, you can't make it mandatory, but you can show them the advantages of. Having it and once a year, you can always request proof of that and the broker should help, should be able to provide you proof of that as well.
George El-Masri [00:36:09] OK, perfect. I was going to say let's say you have a home where you in the first year of purchase, you replace the furnace, new roof. Right. And you do some waterproofing. Would that be would it be beneficial to you to share that information with the with the insurance company so that potentially they might readjust your your policy?
Kyle Melko [00:36:31] Yeah, absolutely. So any time you do any changes to the property, whether it's upgrading something, renovating something or doing any sort of what we call water mitigation practice in place, you pass it on to your broker. There may not be a discount or there may be a discount. What we're finding is a lot of the companies, they like, the newer homes there, they're built efficiently. They're they're being proactive. They're installing backflow valves. They're waterproof in the basement. Some companies offer discounts, some don't. Some will offer you lower deductibles if you have those things in place, which could in turn bring the premium down, even though there's not a formal discount for it. But definitely pass that on to your broker or whoever you deal with for your insurance, because there is advantage. There's typically no disadvantage to telling them that information. Of course.
George El-Masri [00:37:21] OK. All right. Do you have any tips that you can share, anything that comes to mind that might help somebody who's got a couple of rental properties?
Kyle Melko [00:37:29] Yeah. So definitely shop around, you know, not to pump my own tires, but we specialize in it. So we make it fairly easy compared to maybe another brokerage and beyond that is every couple of years. Maybe ask your broker to make sure you're getting the best rate. It's not I don't think it's advantageous to shop around every year because it can become a bit of a process. But definitely if you've been with the same company for five, seven, 10 years, might be worth your while to shop around.
George El-Masri [00:37:55] Right. And then also, if you're with a company for that long, you should probably get your your home the value of your home on the policy. RedOne, reappraised, right?
Kyle Melko [00:38:04] Yeah. So what we do built into our policies are built into our standard renewal process. There's inflation from anywhere to one to three percent applied automatically. Yeah. But yeah, every I would say every three years you should have asked the broker to do a full valuation of the building, provide them with any updates, any upgrades. What happens is sometimes a lot of people finish basement, things like that. They don't tell us it doesn't change the occupancy, doesn't change the rental income. But as we discussed before, now the basement, you might need to bump up the sewer, back up coverage or just in general. Yeah, you wanna make sure your buildings are true to the full value. There can be penalties if you're not insuring the building to full value. Right.
George El-Masri [00:38:46] OK, so any other tips?
Kyle Melko [00:38:48] No, I think that's it. Just deal with a professional, whether it's a broker or an agent or whoever dealing with just deals deal with someone who you're comfortable knows what they're talking about.
George El-Masri [00:38:58] Yeah, sounds good. All right. Let's jump into the next section, which is the random five, OK? And ask you five random questions, as you know, because you've heard some of the other episodes. Yes. And I'll start off by well, actually kind of ask this, but we'll see if you can come up with a different answer. OK, a bit of a challenge. What's one thing investors should look out for when getting property insurance?
Kyle Melko [00:39:20] So I would say the biggest thing and what I see when I'm comparing competitor's quotes to mine is the coverage form even we find. So you want to look for a comprehensive form or a broad form, which is basically going to cover everything that's not excluded. That's sudden and accidental loss. What I find is sometimes a broker that maybe doesn't do a lot of properties, they're doing the best they can. But the properties on what we're what we refer to in our brother's name, Pareles form, so it's much more limiting. So they say, hey, I got a good deal. I'm two hundred fifty dollars cheaper than you. Everything looks the same, but it's no fault of the broker. They they just don't deal with it a lot. So maybe they think that this is the best they can find, but just coverage form and exclusions would be the biggest thing to look out for.
George El-Masri [00:40:08] That's good. That's something that you would do obviously. Yeah. People probably don't know what to look for.
Kyle Melko [00:40:12] Exactly. And even brokers, you know, and it's to no fault of their own, but they just don't do it a lot. So they just don't know what what best in class coverages for that type of policy or insurance.
George El-Masri [00:40:24] OK, number two, what you do on your first date with your wife,
Kyle Melko [00:40:28] first date, we actually went to the movies. It's now a Marshall. So the movie theater doesn't exist. So it's not like we can go back there. And we did dinner at Boston Pizza, so we had dinner, movie and dinner. I just got my license. So I felt like a big shot and my mom's car and going out for
George El-Masri [00:40:47] dinner about ten years ago.
Kyle Melko [00:40:48] Yeah, yeah. About fourteen years ago now, I guess. Thirteen, fourteen years ago. Yeah. Cool.
George El-Masri [00:40:54] Sounds good. Would you prefer two main entrees or one main and a dessert.
Kyle Melko [00:40:58] I'm a big food guy so two main entrees. Is sounds good to me,
George El-Masri [00:41:03] so no dessert, two main entrees. Yeah, I
Kyle Melko [00:41:06] like the desserts can be limiting to me. I don't eat dairy, so typically it's ice cream or there's dairy involved. So I'll I'll take the two main entrees and skip dessert.
George El-Masri [00:41:15] All right. Good answer. Would you drink coffee or tea or would you prefer.
Kyle Melko [00:41:19] I like coffee. Big coffee guy. So drink a few cups a day for sure.
George El-Masri [00:41:23] All right. And what would you do if you weren't an insurance broker?
Kyle Melko [00:41:27] That's an interesting question. And I always like the answers that people give on your on your podcast. And I think depending on, you know, if I wasn't an insurance broker, real estate is super interesting to me. And I think that's maybe what draws me to it as an insurance professional. So it allows me to do insurance and be involved with all these great people in the industry. So maybe a real estate agent or maybe I always find like caddies and golf like the coolest thing that are out there with all the pros and seems to be a pretty
George El-Masri [00:42:00] interesting, cool, cool career. Yeah. All right. Sounds good. So that's it. Do you want to just quickly tell people how they can reach you and what services? Well, that's pretty obvious. What services. Yeah, yeah, yeah, yeah.
Kyle Melko [00:42:12] So we have the website, Student Rental Insurance Dossie. We also have rental property and dot com for more generic rental property needs. Beyond that argument, insurance dot com. My information's on there. Feel free to reach out to even just questions. More than happy to talk to anyone to give them some professional advice on.
George El-Masri [00:42:34] Great. Well, thank you very much for joining me.
Kyle Melko [00:42:36] Thank you for having me.
George El-Masri [00:42:37] All right. We'll stay in touch. All right.