 Inside Hawaii Real Estate, I show dedicated to providing up-to-date information, news, Hawaii home buyers, sellers, and investors. I'm Wotanaka with my co-host, business partner, and wife, Leonie Lam, a realtor with over 20 years experience and various leadership roles in the Hawaii real estate industry. Thanks, well, my co-host, Wotanaka is a lawyer, and he also is the head of a Hawaii title and escrow company, and he and I work as a team to bring you the latest in Hawaii real estate. And our topic is very timely. We're wondering why is insurance a part of our lives? We've been hearing a lot about insurance lately, especially in Hawaii real estate. So we have an insurance veteran with us, with over 21 years in Hawaii insurance, an expert. We have with us Todd Tamori. He's our very special guest today, and we're going to find out what the latest is in insurance. So Todd's the assistant vice president over at Atlas Insurance. He oversees the personal lines, business, and he also oversees the private client group that create tailored insurance programs for our plans for high net worth individuals. He lives in Aina Haina with his beautiful wife and amazing family, and he's a true local boy. Welcome, Todd. Hi, thanks for having me. Thanks for being with us. So basically, insurance is there to protect me financially in case something unforeseen happens. So you're an insurance veteran and expert, and so I'm just wondering, when you are traveling and you rent a car, do you take the insurance that they offer at the counter? I'm always wondering what insurance professionals do with that situation. Great question. And actually, yes, I do take the insurance from the company, even though there is coverage extending from your personal auto insurance. But yeah, as an insurance person, always better safe than sorry. Better safe than sorry. Good to know, well, we always have to get the insurance policy at the counter. Definitely, definitely. Okay. I'm 50-50. Depends on my mood. But anyways, insurance is something that we all know about, we need to pay for, and we hear about it everywhere. But at the same time, insurance is something we might not truly really know about. And Todd, that's why you're here to educate us. And so Todd, what is homeowners insurance and why do we need it? Good question. So home insurance, it's really the protection for your biggest asset or most people's biggest asset, which is your home. It's to protect against the unforeseen, but it's an intangible product. So it's always a little difficult to convey that to people, but it's basically there to protect your home, which is a part of your lifestyle and your family, as far as the structure, as far as your personal belongings, and also living expenses for you in the event the unfortunate happens and you need to utilize the policy. Okay. So you mentioned living expenses. So let's say something happens, something of unforeseen, like you mentioned, and a house needs to be rebuilt. At the same time, I need to go rent a house or stay in a hotel. So you're saying the food, maybe grocery, eating out, those are covered? Correct. The living expenses from a home insurance can apply to just more than just the costs to stay in alternate accommodations like a hotel. So definitely if you are displaced, the cost for that accommodation can be factored in. But to what you mentioned earlier exactly, the changes to your lifestyle, including dietary habits, is a good one. So if you normally do your grocery shopping, prepare your own meals for yourself and your family in your kitchen, but something happens and now you're in a hotel with your entire family that has no stove top, you have to eat out rather than preparing your meals. That difference in cost to your lifestyle can also be covered under the living expenses from a home insurance policy. So that means that, and I don't want to make too light of a situation, but if I wanted to stay in a nicer hotel or shop at Whole Foods all the time instead of, you know, Safeway for example. I mean, is that, so you're saying that could be covered or is there certain thresholds? Excellent. Thank you for catching that, Will. So there are thresholds and it's meant to closely mirror your living situation prior within the limit of coverage that you have on the policy. So if my home is damaged and I need to stay in a hotel, I can't request to stay at the four seasons. It would be the hotel that would be most comparable in terms of location and in terms of cost because I have to, in a way, budget the limit of coverage to the duration of the repairs. So I can't burn through that in the first month if I'm going to be displaced for 12 months. Right, right. Okay. That's good to know. Well, there are limits. Yeah. So if you shop at the sale items at Foodland normally, yeah, you can't be eating out at Ruth's Tris while your home's being fixed. Good question, Will. So, you know, kind of sequeling over to condominiums, right. So 90% of Oahu condos, I just learned this last week, were built before 1990. So they need all kinds of major maintenance and we sell condos, help people sell and help people buy them all the time. So we know there's plumbing issues, sprinklers, spalling issues, elevator repairs, all kinds of stuff. But is it true that insurance premiums are also a major factor when it comes to the overall costs or maintenance fees? Yeah, so the maintenance fees from an association when it comes to condos factors in the master policy for the overall building. So condo insurance is a very timely topic, because in the recent years, the costs have been rising for the policies themselves. The requirement of coverage has been rising for each unit owner. And it's developing to the point now where it's beyond, what am I going to pay for condo insurance? Can I be sure that I can find coverage in the first place when it comes to condo because it's become a very hard market. Okay, okay. So you mentioned a master policy. So that's where the entire condo and then there's two types of policies. Can you kind of get into that? Sure. So every condo owner is a part of the association and the association provides, again, it's called a master policy covering basically the overall building and the common areas of the association. So the way that the building and each unit inside of it was originally built is covered by the master policy. The personal belongings that belong to the association also a part of the master policy. And that overall costs of the master insurance from the association is split up to each unit owner in their association dues. So that's the master policy from the association. And then you have the individual condo policy for the respective home owners units. Okay. And then so we're hearing in our industry anyway that there's some changes that have happened with regards to carriers or obtaining the insurance, which you alluded to earlier. Can you talk a little bit more about that? Sure. So what's been happening in the last, I'd say three to five years is the deductible for the master policy from the association. That deductible for their insurance has been rising. And that deductible can be assessed to an individual condo owner in a claim that they're responsible for or even just a part of. So each condo owner now has to be able to cover that deductible from the association insurance. When I first started, most of the condo insurance deductibles range from 10 to 15,000. That's quickly escalated to from 15 to 25,000. 25,000 to 50, even up to now, we're seeing deductibles in six figures, 100,000 and over. So that would mean every owner in that condo building needs to be prepared to pay that deductible in order to utilize the master policy from the association in a covered claim. That's kind of hard in the market pretty quickly where the burden of coverage has shifted from the building insurance provided by the association to now more responsibility being put on the individual condo policy for each homeowner. So you're saying, and I just want to get this right. So as a condo owner, and you know, I used to live in a condo. So I have to pay for the association or contribute to the master policy and also my policy for my own unit. I think it's referred to as HO6 policy. So is that right? So I'm paying annual premiums for my own unit and then usually for the association master policy, would that be part of the maintenance fees? Yes. The maintenance fees, association dues, that can be a number of different things. The cost of the master policy is one of them. I mean, it could be like remediation updates to the overall building, common areas, but within the association dues and the maintenance fees is built in the cost of the master policy for each unit owner. So it splits that cost up. So even as the cost of the master insurance policy itself goes up, that increases the cost that gets passed on to each individual condo owner on top of what you referenced, the HO6 policy for your own individual unit. That one's not going to be the same for every owner in the building, depending upon their situation and their home. But each owner has to pay for the association insurance as well as their own individual insurance. Okay. And then, you know, I do have a question because Leone mentioned earlier that, you know, these are aging condos built in the 60s, 70s, in the 80s. And, you know, there's like spalling issues or re-piping. How come, you know, I often hear that there's a special assessment? How come those are especially assessed versus being covered under insurance? So those issues and similar to an individual HO6 policy as well, wear and tear over time is not an insurable event. So there are certain things as a home owner and as a member of the overall association that the building, the structure needs to be updated as the building gets older, just like if I own a home, I have to re-roof at some point. Roofing is not necessarily going to be covered by home insurance unless it's part of a covered event, like a fire, like wind damage. If it's just upkeep, that's the responsibility of the home owner. And in the situation of a condo, you're part of a bigger association. So you play a small share, you have a small share in that. Ah, okay. That makes sense. I mean, just like humans, right? As we age, our life insurance goes up. That's a good one. Yeah. Yeah, the upkeep gets a little more as I get older. So yeah, same thing with the building and the structure. There are certain things that need to be done over time. And when that time comes, that assessment gets passed on to the unit owners to share collectively. And would you mind getting into maybe like a real life example where both an association master policy and also an individual 806 policy might kick in at the same time? Sure. So for this example, let's assume I live in condo unit 201 and you both live in condo 101 underneath me. If there's a plumbing leak or burst in my home that damages my unit, but also trickles down to damage your unit below me, the total damages is going to be calculated, factored in to the claim. And so once it hits a certain amount and the building insurance can be utilized, we're each going to use the building insurance to repair the original construction of our homes. That would be the drywall. And if my flooring is original carpeting, I'm going to use the building insurance for that. But if your unit has upgraded flooring, then that's something different. But that's where we would utilize the building insurance to repair the damaged portions that are original. And then our own 806 policy potentially for upgrades to the unit or damage to my personal belongings, my furniture that was damaged in the event, because that's not going to be covered by the master policy from the building. Yeah. Yeah. So in that example, so let's say, I mean, there's like a leak coming from your unit to our unit downstairs. Will we still have to somehow pay for ours or would your insurance cover or an association cover everything? Or with the unit below who's affected, would we have to pay a deductible to pay for any part of our unit? That is an excellent question that doesn't have a simple answer. And the complexity is because not every association has the same bylaws. There are associations that are going to say, hey, Todd, you're responsible for everything. Therefore, everything should go through your insurance. But there are other associations that say, hey, Todd, you're responsible, but you need to take care of your unit, as well as possibly the building deductible, since you caused the damage. And Will and Leone, even though it wasn't your fault, you guys need to file through your own insurance and then have your insurance company collect from Todd's insurance on the back end, rather than including your damages in the payout from the master policy. So you would still utilize your policy. Your insurance company would try to collect from mines on the back end, including your deductible. That takes time. And then it's a recorded loss on your insurance policy as well. This is like a really good reminder that it totally varies from condo to condo, that you need to be really attuned to whatever the bylaws for that condo says or what the association is putting out so that you understand where your liabilities are, because it could totally vary, right? I mean, if you don't know. Correct. Yeah, that's a big recommendation that we have for all clients now in condos is to have a good understanding and be involved to know what's being provided from your association to know what you need to have on your own individual condo policy, because excuse me, the building deductibles itself are so high now that in the past, you could have covered those deductibles by accident when they were 10,000, 15,000. But if you're in a building that has a hundred thousand dollar deductible, you need to have a specific conversation with your insurance agent. Make sure that you're properly covered. Super good tip. Super good tip. So what we're hearing in the real estate industry, generally speaking, when it comes to condo insurance is that there are less carriers that are providing insurance. Is that accurate? That's accurate, because again, as a part of the hardening market, some carriers that traditionally offered condo insurance, they've stopped writing coverage at the moment. It's not clear if it's a long-term decision or short-term. Other carriers are now weighing in other factors that weren't necessarily heavily addressed in the past. So if you have a client purchasing a condo, there are carriers that will look at the loss history for the client in terms of if they filed property insurance claims at a prior location and that'll be weighted. They may look at the loss history for the unit itself. So your client purchasing a condo that had a loss last year might have their options reduce significantly in terms of the companies that they can get insurance from. It's just a matter of we don't expect clients to know, okay, this insurance company is accepting coverage in my building and this one isn't. We just recommend people shop around multiple options or that's the strength of the ease of working with an agency. We write through eight different carriers. So it's like shopping eight different options at once and it's my job to filter it to the specific needs of that client and that location. I am learning so much already about insurance and this is actually getting exciting for me, because now I'm coming up with all these questions. So we have a lot of investor clients and let's say they have tenants. They have renters in condos. So in that situation, of course, there's a master policy for the association and what type of policy would the investor get? And then is there a separate type of insurance for the tenants? Yes. So the investor who owns the condo can get an HL6 policy themselves. They need to make sure that the carrier accepts rental exposures. So there's a difference for insurance long-term rentals, which is a rental agreement of six months or longer. Certain carriers are good with that. A lot of carriers are not okay with vacation rentals, which would be six months or less or what we're seeing for the Airbnb's daily or weekly rental agreements. So that also plays a factor in how many options you would have for condo insurance to begin with. But the landlord would get a condo policy to cover their unit that works in conjunction with what's provided from the association master policy. And if it's going to be a long-term tenant, I would highly recommend the landlord either strongly recommend or sometimes require the tenant to have renters insurance because the renters insurance, it does protect the tenant's personal belongings, but it also provides liability coverage for the tenant. So if your tenant is the one that causes a situation that damages the home, damages other units, the landlord necessarily may not get involved. If it's deemed that the tenant is fully liable, the liability would come from the tenant's insurance rather than the landlord's insurance. But if it's going to be a vacation rental, obviously they wouldn't need like a renters policy for that. The home insurance for where they're coming from, vacationing here, their home insurance should cover them while they're renting it short-term. I was going to kind of ask a question like, you know, since we're in Hawaii and then hurricane coverage is also a big thing, right? So we're talking about homeowners, but like for condos, hurricane policy, is that something that's part of the master condo policy too? Or is that something that the individual condo owner needs to get on their own? So there is coverage, there should be coverage provided by the association for hurricane damage for the same thing. The original construction of the entire building and the common areas. People can consider getting hurricane insurance for their individual condo, especially if they've done a lot of renovations or the condo itself has a lot of renovations. That's value of the home that you want to protect in the event of a hurricane. Because if a hurricane hits damages a renovated interior, the master policy again is only responsible for the original construction. And are there challenges right now with hurricane policies for our aging condos that you're seeing? No, hurricane is a lot more open. So it's not as restrictive. What about this? What about that? If people want to get hurricane coverage, that individual hurricane coverage is readily available. I was always curious. So in terms of there's a lot of condos in Waikiki and many of them are in a flood zone because they're close to either the ocean or alaba canal. So if you're on the 20th floor, of course the unit itself, you don't have to worry about flood, but the building itself, you may have to. So if the building is in a flood zone, what happens with your 806? Do you need a separate so-called flood insurance individually for that specific unit? Or is everything covered under the master's policy? So if you're on the 20th floor, I mean, I always have that conversation straightforward with the clients because flood to your point, it's external water damage coming from the ground up. So the only event that would affect the person on the 20th floor that they would utilize an individual flood insurance is if water got up to the 20th floor of that building. The people on the first floor, lower floors, maybe something to consider, but for the building itself, there should be a master flood policy. Okay, got it, got it. And then I was always curious in terms of this is like a general homeowners policy question, but let's say that there's like theft involved of your personal belongings and you file a claim with a homeowner's insurance, like my kind of got broken into. So how would you prove that you actually owned it and how this from an insurance standpoint, how did they deal with it? The more information you can give, the better, it just facilitates the claim. So what I recommend to people, especially in a condo or even single family homes, take a picture of each room, save it to a cloud in your computer. It's a good reference point of inventory in case it's hard for you to remember everything that you had as well. If there's a substantial loss, like a fire, for example, knock on wood. In the case of theft, receipts are helpful. They may ask for photos of items, if you have any. But like I warned you guys, don't let me get into the nitty-gritty of the policy, but theft on every home insurance has a specific limitation for theft of jewelry and watches. So everyone just assumes that high-value jewelry is my personal property, but it requires specific coverage. So most jewelry is limited to either $1,000 to $2,500 per occurrence for theft. So if you have a $5,000 or $10,000 engagement ring, that's not going to be covered by the home insurance unless you, so these are all conversations. Don't be afraid. People shouldn't be afraid to have these conversations with their agents, but that requires a specific coverage on its own that'll protect the jewelry here in your home, whether you travel worldwide to Japan, you're swimming in the ocean and it falls off your finger. That requires a specific type of coverage. Good to know. So kind of like I have a last question for you. So when considering insurance options for homeowners or condos, is it always better to go with the cheapest option or what would your guidance be for determining the best policy? So my own personal philosophy and the way that I've always done things is to look at the protection over cost. I mean, to a certain extent, everyone has a budget, certain things like necessities, but when it comes to insurance, you want to be able to get back to the way you were prior to the loss. So you could have a policy that's lower in cost, but it's not going to help you the way that you need it to when it matters most in a significant claim. So it's a balancing act and it's one that people should not be afraid to ask the insurance agent. How did you come up with this coverage? What other options are there? So due diligence on behalf of the homeowner, looking at multiple options, that's what I would recommend. That's how you're going to get a sense of A versus B rather than just taking the cheapest option right off the bat. Well, thanks for such amazing advice. Thanks for being our guest today and thanks for just all the tips and we've learned so much. Right, well. Yeah. And Todd, how do we reach you? Let's put up the last slide because you're so informative, lots of valuable information. So thank you so much for being our special guest on our show, Todd. We really appreciate you. Oh, thanks so much and thanks for having me. I appreciate it. Aloha. Thank you. Aloha.