Insuring Real Estate Investment Properties in Atlantic Canada

Alex Bell

Daniel: My little introduction here which is, I always tell people because I've got people who say, for insurance sometimes based on price alone. And they don't realize that yes, there's a small chance that something bad could happen. But when it does, I tell you, you want to have the right person helping. 

So, seven weeks ago, a house that we own a rental property just outside of Ottawa, burned down and it was insured by your company and we got full payment, no deduction. So, that was really good. And the guy, who's the one who looks up to that, is actually now going in our place to the company to get also the other bills, like the demolition and the fire and department and all that kind of stuff. And he's pretty confident that he's going to get that taken care of. 

So, I am a fan of yours and I am going to be with my quarter forever because man it seems easy for an insurance broker to say, oh, I do get service and I do this and I'll give you good prices and whatever. And then something happens and that person's gone vacation doesn't return phone calls, nothing happens. So, I'm glad that I'm dealing with you. Thank you very much for being here with us this evening, Alex Bell.

Alex: Daniel, it's my pleasure. And again, it's something that I've said to the REITE club on several occasions, the insurance piece is not the sexiest part of real estate investing. It's something that people really begrudge. But what is really important is as you continue to build your portfolio and someone like yourself who has the number of doors slots, or the size of the portfolio that you do, it's very important that you protect your assets properly.

And as most investors will know, the appetite for investment properties is very limited in the Canadian marketplace. So, you really need to know. Dig deep into the wording and the coverage. And I'm really glad we were able to help you. It makes my job a lot more satisfactory when we have a good story like this, there's two things when you send me that email and we spoke shortly thereafter, I was really happy to hear.

First of all, there was no loss of life, which was fantastic. And secondly, the dog got out somehow as well. So, happy to hear that, I'm a big animal lover. It's never a good experience when you go through something of that nature, but I'm glad it's worked out the way it has for you.

Daniel: Now you are a broker and MyCor is a national company. So, do you also insure houses in the Atlantic, Canada?

Alex: Absolutely. We do. Yeah, so, MyCor, we are a full-service brokerage. We're licensed in every province in Canada with the exception of Quebec. Quebec's kind of a hybrid. We are able to place risks in Quebec but that is a different model, but yeah, I do a lot of insurance out on the east coast of Canada. Most investors out there, we continue to drive through this hard market. Some insurers are pulling out of the marketplace especially in New Brunswick. And again, not to the defense of insurance companies, but they're not making as much money as they would like to make.

So, some of them are pulling out. I do have a lot of new clients that are reaching out because they're not being offered renewals, their insurance, their current insurance carriers are getting up off risk and in some cases, grade out of the marketplace. So, it continues to be tough. But yes, we certainly work a lot of clients who live in BC who love investing in the east coast of Canada.

Daniel: All right. An investor from Ontario. I want to buy in Atlantic, Canada. And maybe you go, you take a minute or 30 seconds province by province. Is there something I should know before I even call a realtor to buy a property there from an instrument's point of view, because I don't want to get all the way 90% of the way to buying the house only to find out that on an insurance point of view, there's a barrier there that I just can't get over. So, are there things that we should know about insurance insuring houses in the Maritimes?

Alex: Yeah, so there's really, as far as actually qualifying for insurance, there's really no difference or stipulations in Eastern Canada that would not be applicable to say Ontario or Western Canada, which you do want to do is first of all, finding an insurance professional or broker who does have the ability who is licensed to first and foremost, that they do have the ability to place business there, but there are no particular barriers to the Eastern properties.

I've made some notes here. If you want to drill down on the property, a maintenance piece or property management of Eastern Canada, we can see that there are differences for them. But overall, just make sure you reach out well in advance to make sure that you get a quote. All right. It's always a good idea to have that.

It's no different than qualifying for a mortgage Daniel. You want to have those insurance terms in hand, first of all. So, you know what the premium is going to be. So, you can plug into your proformer, it just helps tighten up the cash flow projections. The one thing I would say is don't leave it until the last minute, because you'll just leave everyone scrambling.

Daniel: And I guess one of the things I was thinking of is, for example, we know there's been some years with really severe hurricane season along the coast and they end up in Halifax and then, St John Newfoundland and stuff, and which is something that we don't get very much out in Toronto.

So, would there be some special deduction or a deductible or whatever depending on where you are in some of these provinces for acts of God?

Alex: That term acts of God is actually a fallacy. There's nowhere in an insurance policy wording that's pertinent to me and movies and whatnot.

You'll never see that wording actually in an insurance policy. So, what you're talking about with respect to the weather. Yes, there certainly are times. And when we get into hurricane season what will happen is, as that hurricane travels up the Eastern seaboard and gets into Eastern Canada.

Excuse me, we get notification emails from our insurance carriers, that there was a moratorium until that hurricane actually dissipates, goes out furthert in the ocean. You will not be able to bind. Any business declines until further notice from in front of the actual insurance carrier.

So, that would be more of a short-term example, but what is happening is flood based claims. Some carriers are excluding that from the policy in general, right? They will insure the property, but there'll be certain exceptions fly to being the most common and the ones that the insurance companies that still offer flood our attempt to increase the deductible in certain pockets obviously in Canada.

Daniel: Okay. Anything else that you want to share with our listeners. Anything else that you want to share with us that we should know of, be aware of, or be mindful of, if we're going to buy properties from an insurance point of view?

Alex: It's my understanding that we were going to focus on property management tonight. For investors, especially out of province, the first point would be out of province investment. So, if you're looking to invest in the East Coast, it doesn't matter what province it is.

Most insurance companies, first of all, there's only a small handful of companies that will bind or place business there. And the ones that do will make it absolutely mandatory insurance start. And we use it as a subjectivity. The policy is subject to proof that you have property management in place.

All right. And the mindset or the reason being for that Daniel and insurance companies are in the business of risks. So, if they are going to go and assume that risk with that particular property, they want to know if someone is living in Ontario or British Columbia who's looking after the property, right?

So it is a condition of insurance that you do have solid property management in place. And then they'll want the name of the property management company. And they'll also want proof of insurance for the property management. So, you would need to get a certificate of insurance from the property manager. So, that's the first piece. The second piece, which is really becoming relevant with respect to property management. If for investors who like the multiunit strategy. Okay, so, anything from say six units, six doors and up a small apartment. If there is a common or shared parking lot in that multi unit investment or property.

Not only do you have to prove that there's property management in place, but the big insurance company will want to know all the particulars of the snow removal. All right. You'll have to be able to prove that snow removal is in place and being conducted on a regular basis.

And obviously, the reason behind that is the liability piece, right? The slip and fall. Okay. That's really important. And now what's happening is, the straight snow removal contractor, some property management firms that incorporate that into their services.

But what's happening is the insurance industry as a whole is really hammering snow removal companies. That's really difficult for them to get insurance. And if they can, prices are tripling in that particular space. So, that's a key area. You want to make sure that you're dealing with a scalable property management company that can handle that piece for it’s very important. 

And the last thing is you could certainly relate to this Daniel. A common question I get from a lot of investors is how do I prove in the event of a loss, say a slip and fall, or any damage or a total loss, how do I prove to the insurance company through logs or journals?

So, you want to make sure that the property management company you're working with is conducting regular monthly inspections. And there's proof of that. And the easiest way to do that is to make sure that property management company is providing you with monthly or quarterly, whatever it is, journals.

Okay. Because what would happen? And I'll use the example of a slip and fall claim. Again, what will happen is, if there is a slip and fall, you can bet. You can absolutely 100% certainly that the lawyer is going to name both the owners. All right. Or the investor and the property management company in that lawsuit, they will both be named 100%.

So, you want to make sure that regular maintenance is being conducted and you have proof of that.

Daniel: So, basically what I'm hearing here is you don't go to the maritime, buy a property and hire your brother-in-law, who is retired. And he was going to do property management more or less when he feels like it or when is whatever you need a good professional registered insured property management company, to look after your houses in that area, 

Alex: Yes, exactly. Specifically, for out of province investors, if you live in Eastern Canada and you're buying properties in your home province, then that's not as important, but it's still a good business practice for people that live in that are buying in the same province where they live.

But for out of province investors, absolutely. That's the case.

Daniel: All right. Now, Alex, we've been talking about insuring properties in Atlantic Canada, but you work coast to coast. The keyword here is the word insurance. And the next keyword is Alex Bell. So, when you want anything insured, at least give Alex a call before you do anything and then see how he's going to take care of you. Alex, thank you so much for taking the time to explain all of these.