Tuesday, November 16, 2010

Terminology Tuesday - Insurance Deductible

(Note: I think it's important to know the terminology and words used when learning any new business including mobile home investing. I came up with 'Terminology Tuesday' as a way to go over the terminology used in the mobile home business. It's important to know the terminology when talking to people in the business so you're all on the same page).

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Regarding insurance deductibles on mobile homes, you really need to go with what you feel comfortable with. The way I work things is that the insurance is rolled in with the monthly payment.

In my experience, my insurance company offers me 3 choices when it comes to insurance deductibles on mobile homes - $250, $500 and $1000 deductibles respectively. The higher the deductible, the less the insurance premium. On the other hand, the lower the deductible - the higher the insurance premium. All in all, you just need to weigh what you feel comfortable with.

When I first started out, I chose the middle of the road - $500 deductible and continued with this figure for many years. Now, there were some who advised me to take the higher $1000 deductible to make for a lower premium.

The argument was that usually if anything ever happened to the home - it was rare. And, if anything ever did happen - the insurance is really there if there is a major catastrophe done to the home (i.e. roof needs to be replaced by tree damage) or if the home burns down. Above all else, the insurance is not there to cover the small stuff - it would be best to get a contractor involved for the smaller items (not the insurance company).

After years of going with the $500 deductible figure, my experience was that nothing major had occurred. And, if something major were to occur - I would be prepared for the worst (such as a fire) and let the insurance take care of it. If anything smaller happened, it would be up to the homeowner to take care of it and get a contractor involved.

So, now my comfort level has changed - I usually go with the $1000 deductible for insurance coverage on mobile homes. And, I'm ok with it. But, again - that's just me. When choosing an insurance deductible, I highly recommend being comfortable with whatever figure you choose.

(Note: For those out there, I do recommend using your own insurance company when doing "Lonnie" deals. For me personally, I don't leave it up to the buyer to choose and obtain their own insurance coverage - there's just too much risk involved. Plus, in most parks getting insurance on the home is a requirement before any buyer can occupy the home).

Regarding the insurance coverage amount, usually the insurance company will determine that. Sometimes the insurance company may ask you how much coverage you are requesting. But, usually insurance companies will only cover and determine coverage based on the replacement value of the home. Again, go with what you feel comfortable with.

(Note: Always remember to do a smoke detector verification check before requesting to place insurance coverage on a mobile home. As a requirement, most insurance companies require this before coverage can be placed).

I hope this "Terminology Tuesday" post has been helpful and has given you some useful information to use.

Happy investing!

p.s. Feel free to leave comments on any post either here and/or my Facebook Page. Comments are always welcome, thanks for reading!

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