r/Insurance • u/-Clayburn • Jun 24 '26
Home Insurance I can't get reasonable property insurance because of mixed use and two addresses
My house I bought in 2018 has a commercial area attached to it. It's a single property. I pay a single tax bill on it. However, it has two addresses, one for the residence and one for the store.
I bought the place for $160,000. Maybe it's gone up in value since then, but I couldn't imagine it being more than $230,000 or so. (We did do some renovation on the commercial side since that was out of use since the 80s.)
However, I'm having difficulties with property insurance. They want to do two policies because of the two addresses, but they're not really distinct property. They are attached and also legally a single property.
My latest quote is $3,500 for the residence and $6,500 for the business. That's a $10,000 premium, and with two policies it means two deductibles.
What are my options? I'd just like some simple policy that covers the building for damages, a single premium and nothing extra. And if it can't come in at a reasonable price (like $3,000 or lower), then there's little reason to insure it. It would be better to save the $10,000 and just pay for damages myself as needed.
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u/DartTheDragoon Jun 24 '26
What are you using the "commercial side" for? Are you living in it, using it for storage, operating a public facing business out of it, using it as a workshop, etc?
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u/-Clayburn Jun 24 '26
It's a bubble tea shop.
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u/DartTheDragoon Jun 24 '26
Then you will need two separate policies. If the issue is overlapping coverage then you may need to subdivide the plot. Whether you are able to do that and how difficult it will be is outside my expertise and will be location specific.
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u/fromhelley Jun 24 '26
And when there is common wall damage, who pays? If the Boba shop leaks water damage into the residential area, will the insurance pay? Seems an insured cant sue themselves for damages.
I have written many mixed use buildings. Its always commercial coverage.
Because they are the same building, it would be really hard to get a personal or commercial policy, while excluding the other exposure. That is why tenants of strip malls carry betterments and improvements rather than building coverage.
It should be one policy, not two.
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u/DartTheDragoon Jun 24 '26
It may be hard if not impossible to exclude overlapping coverage, but I have to imagine having just a commercial policy will have some gaps in coverage. Is the commercial policy going to cover his personal property unrelated to the business? Will the commercial policy meet all the requirements set by his mortgage company?
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u/fromhelley Jun 24 '26
Personal property unrelated to the business will require renters insurance. That is a given, unless the unit is also rented out. The renters insurance is not required for the mortgage or closing a sale. The $3000 for the "home policy" op spoke of is definitely not a renters policy!
The mortgage will know this is a mixed use, and will look for insurance that covers mixed use. This would be a commercial loan rather than a home loan, so the mortgage would be fine! There are several endorsement options for commercial policies, so this is a non-issue.
I have never heard of a mixed use building having a commercial policy and an HO-3! And I have never had an issue getting commercial policy for mixed use.
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u/DartTheDragoon Jun 24 '26
I don't work commercial, so I'll yield to you. But I also feel like some info is missing somewhere. He bought the property in 2018 but is just now having insurance issues. I feel like this all would have come up prior to closing, or at least would have been sorted out at some point over the last 8 years.
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u/fromhelley Jun 24 '26
Op sounds surprised that two policies are needed. That has me thinking they had one policy up until now. It could have been a personal policy, but it would have been written and rated wrong if it was.
But just FYI, you have more coverage options with commercial than you do with personal.
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u/-Clayburn Jun 24 '26
Well if it has to be separate policies, then we need to figure out a way to lower the premiums because $10,000/year for a $200,000 property doesn't make any sense.
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u/Clubhouse9 Jun 24 '26
You are attributing the cost to property value, but with a commercial on the property liability becomes a bigger issue. You can shop for the most cost effective options, using a an insurance broker is the best way to shop around, but don’t expect your property insurance will be priced like a simple homeowner policy.
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u/DartTheDragoon Jun 24 '26
The price is the price. Most you can really do is shop around. You might be eligible for some small discounts for mitigation like hurricane proofing depending on where you live.
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u/-Clayburn Jun 24 '26
I've tried, but it seems like insurance is all commoditized at this point. I'll keep asking around, but all insurance agents seem to use the same basic system for determining premiums.
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u/Dramatic-Ad9089 Jun 24 '26
Does $10,000/year make more sense when there is a $200,000 injury claim when a customer spills hot tea on themselves or slips and falls in the store?
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u/-Clayburn Jun 24 '26
I'm talking about property insurance, not liability. The quote probably included liability too, but my main concern right now is getting reasonable property insurance. I'll get liability separate or add it on after.
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u/Dramatic-Ad9089 Jun 24 '26
You can't make a fair price comparison if you aren't sure what the price includes. Either way, as others have said, you'll have to price out each policy separately, as you will have different exposures.
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u/dvr5 Jun 24 '26
have you considered dividing the plot?
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u/-Clayburn Jun 24 '26
No.
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u/adjusterjackb Jun 24 '26
Subdividing the plot is not going to fix the insurance issue. You're still going to need two policies.
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u/StealthyThings Jun 24 '26
Is the commercial business a separate entity? Something you could lease the space to?
You could look at an owners/landlords type policy for the space you use for personal purposes and the shell of the building, etc. Then have the business get a tenant-type policy to cover any business property and equipment and also a liability clause.
Talk to your lender about what they require, ask for broker recommendations for the mixed use, talk to some commercial insurance brokers.
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u/BlueLighthouse9 Commercil lines underwriter Jun 25 '26
Have your LLC own the building and lease the residential part to you. You’ll get renters insurance (dirt cheap) for your own property and personal liability. Bundle with your auto carrier.
Get a commercial policy to cover the building owned by the LLC. With the residence being rented out, even though it’s really to you, it should qualify for a commercial policy. Depending on the building age and condition it still may be hard to find great coverage but that is how I’d do it in your situation. My company would write this if the building was 25 years old or newer depending on which state and city.
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u/-Clayburn Jun 25 '26
How do I make that actually work? I have the LLCs, but I've never really understood how to "use" them. Like would I literally just write out a contract? Also right now I own the property as myself, and it's mortgaged, so wouldn't it be hard to move it over into the LLC?
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u/Busy_Account_7974 Former Insurance Peddler Jun 24 '26
Mixed-use would be a commercial policy for the building and premises liability.
The residents would need a renters policy to cover their stuff. The commercial occupant has their own business policy.
If the owner of the property owns the business, then they could also insure the building under the business policy. If they live there they still need a renters policy.
I think the bulk of my commercial business is this stuff.
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u/-Clayburn Jun 25 '26
So, what I'd like to do then is get one commercial property insurance policy for the whole thing. Then get liability insurance through the business. I wouldn't have renters insurance because my crap isn't worth anything.
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u/Busy_Account_7974 Former Insurance Peddler Jun 25 '26
I have a client, lives upstairs, downstairs is their tea bar.
Commercial policy covers everything but their stuff, like you they have "crap".
Turns out the Mrs is a real estate broker and has EXPENSIVE crap.
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u/TAckhouse1 Jun 24 '26
OP how does $6500 compare to your profit from the business?
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u/-Clayburn Jun 24 '26
What profit?
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u/MotherFuckaJones89 Jun 24 '26
I disagree with most everyone so far.
What state are you in?
I would write this, and do, in fact, as a single commercial policy. It would not be personal liability which follows you as an individual and instead be commercial general premises liability.
I suspect most of these commenters are either not insurance professionals or write only personal lines. A shared wall means a single building and a single mixed use policy.
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u/ruraljurorrrrrrrrrr Jun 24 '26
It definitely can be done, but you immediately knock out most of the carriers available to you. I’m in underwriting and most of the agents I work with wouldn’t have a market for this. Most basic carriers around me would write it on two policies. My company would require both policies to be with us.
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u/MotherFuckaJones89 Jun 24 '26
I agree the market is smaller. This would be E&S absolutely. That said, I can think of a dozen markets that would be interested as an LRO.
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u/-Clayburn Jun 24 '26
New Mexico. I asked about doing it all commercial, but the secretary sent me some quote sheet from Tapco to fill out. I don't know what to fill out though. It looks like something the insurance agent is supposed to handle.
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u/MotherFuckaJones89 Jun 24 '26
Sending it to you to fill out is poor customer service, but you'll likely have more of the info than they will.
In a perfect world, you would own the building in some sort of real estate holding entity, call it Landlord, LLC, and you would rent the commercial space to the bubble tea business and the residential side to yourself as an individual.
There would be what's called an LRO policy for the RE entity, a BOP policy for the bubble tea business, and a renters policy for your own residence.
More policies doesn't necessarily mean more expensive, but that's the best way to not have excess coverage and make sure all of your exposures are covered.
If you own the whole place as an individual, you would still have an LRO policy but it would be in your individual name and would not include the business exposure itself nor would it include personal liability.
$10k seems very high if you're in a city or otherwise moderate risk area with a replacement cost in the 200's.
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u/-Clayburn Jun 24 '26
I think part of the problem is replacement cost is like $800,000 because it's based on square footage. That's not what the property is actually worth, though, and nobody is going to build a $800,000 house here when they can buy an already built one for $200,000 to $300,000.
I have LLCs but haven't actually used them for anything. I own the property myself as an individual, but I have the bubble tea store operating as an LLC. I also have a separate LLC I use for miscellaneous business stuff related to my work.
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u/MotherFuckaJones89 Jun 24 '26 edited Jun 24 '26
The carriers are generally not concerned with what it's worth. A replacement cost policy is going to pay to rebuild, even if it's worth a quarter of that.
You can look at actual cash value, but your pool of carriers is much smaller and the rate is much higher per dollar in coverage, so it's generally not worth it.
I've seen ACV policies that were more expensive than their RC counterparts even for a quarter of the coverage limit.
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u/-Clayburn Jun 24 '26
Yeah, this seems like just one of the many problems with the insurance system. I literally do not want $800,000 if the place burns down. I don't need it. It's too much. I wish it were as simple as "I bet you X that my place burns down sometime this year" and if it does, they pay out with whatever odds makes sense. Otherwise what's the point? Like why do I want money after my house burns down if not to buy a new place to live and replace some of my furniture and shit? So anything more than that is overkill.
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u/MotherFuckaJones89 Jun 24 '26
In your example, what would you do if just half of it burned? Would they pay you half of the $200k you insured it for? But it would cost $400k to rebuild that half. What then?
The issue is that most property insurers don't want to write intentionally underinsured buildings.
If they do, they see more disputes after losses, more complaints, more litigation, and poorer underwriting results. Almost all have internal guidelines requiring insurance to approximate replacement cost.
The lender could also have a contractual requirement for replacement cost.
So the frustrating answer is less "it can't be done" and more "most insurers have decided they don't want to sell that product."
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u/-Clayburn Jun 25 '26
They could pay me $100,000 and I'll use that to buy a new place to live.
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u/MotherFuckaJones89 Jun 25 '26
And the bank is stuck with a half burned building that used to be their collateral.
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u/-Clayburn Jun 25 '26
It's not like I get out of the loan. I'd still have to pay them.
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u/siyman4 Agent Jun 24 '26
It may be one physical property, but it is two vastly different risks hence the two policies. You should be happy there are even carriers willing to insure it as this is a very unique (unique is not a good thing in the insurance world) risk. Your options are to pay it, keep shopping, or sell the property. Self-insuring this risk may pay off in the short term, but you are one major disaster away from being SOL