ADPI_024: Four Types Of Insurance That Will Have Your Six

Sep 09, 2018


Episode Transcription:

Hey hey what's going on guys Mike foster in the house. Welcome to the active duty passive income podcast. If this is your first time you are in the right spot. Welcome to our show. If this is your second time, third time however many times awesome really glad to have you here. Please make sure you go ahead and subscribe. This is going to be a great episode on insurance and this is one you definitely don't want to miss.

Hey freedom fighters welcome to the active duty passive income podcast. The only place where military members, veterans and their families learn how to build wealth through real estate investing. I'm your host Mike Foster and I'm here to show you how to stop wasting your benefits. Now get off your ass, step up to the firing line and make ready for today's lesson. Shooter stand by. 

Hey hey what's going on guys Mike foster here. Thanks so much for listening again and this episode is on insurance. I'm telling you guys this is definitely something that you need to take into consideration when you are buying your first property, buying your next property however many you have in your portfolio. This is definitely something that you want to have in your back pocket. Because and I'll tell you why, if you're like me here in the Norfolk area we are impending on a hurricane and we're in the middle of the season. It is that time of the year again and everyone is freaking out.

I'm telling you it's great. We’ve got a hurricane that's supposed to hit us here and by the end of this week everyone's going crazy in the stores, all the water is gone. I went in the store today because my aunt asked me to buy some water for her and how would I go there and literally the whole thing is empty. Seltzer water gone. You know all these random like the Perrier of super fancy stuff right, the Fiji that no one really touches inside the biggest store. Because it's too expensive all that was gone man. It was funny because and I don't know if this is for something I should share.

I feel like I'm getting stabbed. So I was listening to this in the Norfolk area. But as I'm walking into the beginning of the store I see one of those giant barrels you know I'm talking about, those giant barrel water that like you put on top of the Machine and then you have to get your little cup and you press the button the water comes out. so I see one of those left and as I'm looking at it I'm like hmm I wonder if I should pick this up. Because I don't know if I'll find water and I didn't, I should have. But I didn't at first. So I drive fast it with my little cart and like beeline it straight to the water out I'm like man let me see if it's there. Boom bone-dry.

Guys I'm telling you like I saw one of those little dust balls like they used to show in those old westerns just like fly right by the aisle, everything was gone. I was rolling. Man, I had the last water in that grocery store. Oh man so now I'm praying that I'm not going to get stabbed tonight in my sleep. But hopefully you know hopefully everyone's cool.

But I'm sure they're going to restock. I'm sure you could order you know some off Amazon to probably drop a whole like gallon of water for you from one of their little drones that they fly around. But anyway that was an interesting story. Definitely want to share with you. But what does that mean? What does that lead into? That leads into this whole episode on insurance right. Because obviously we have storm conditions coming, everybody's worried about flooding.

They’re worried about you know wind knocking off the shingles off of their roof. They’re worried about you know stuff being blown from the street into their home. Maybe a tree or something right falling on power lines. All this crazy chaotic stuff going on because it's hurricane season. But I'll tell you who is feeling a little bit more comfortable about the rental properties that they have. Investors that have insurance okay and this episode we're going to break down a few key insurances you are going to want to have or consider if you either have a home, if you're looking to buy a home or if you have a rental property or even a portfolio of rental properties right.

Because you never know right and we always want to plan ahead of time not at the very last minute. Like you know myself going into the grocery store trying to buy water literally four days before the storm. Now I got lucky. But you may not be okay so let's go ahead and dive in. 

Okay so the first insurance which is comes pretty standard is house insurance right or homeowners insurance. So homeowners insurance is something you want to have. Because it not only protects the stuff that you have inside the house. But it protects the four walls around you as well.

Okay so homeowners insurance you know you want to make sure has at least at the very least you want to have all the line items of potential hazards in your area okay. if you live in an area that is prone to high winds, that is prone to heavy rain or hail storms or you know all these crazy things that might happen; you want to make sure that your insurance has those line items dictated in your policy. Okay if you don't have a particularly item dictated in your policy, you will not be covered okay.

Definitely talk to your insurance provider to find out stuff that you will be covered for. However typically okay typically if you don't have certain line items delegated in your policy, you will not be covered by them. So you definitely want to make sure that that's something that you are looking for when you're getting your quotes okay and don't ever you know go with one insurance company you know for your policies. Look around, okay shop around for sure see which ones give you the best rate the most coverage with the least amount of deductible and yeah I think really that's really the key.

Okay you want the most amount of coverage with the least deductible. Because the deductible is what you're going to get charged in the event something happens and you have to take this claim okay and then they'll cover you for whatever it is. If you can get fire coverage on your insurance that's always great too. Because you know you never know right. Might have a grease fire in the home. Maybe you have a, I don't know an outlet you know catch on fire. God forbid when you're not there right, anything can happen. So you just want to be able to cover your bases and that's what insurance is going to do for you okay.

So insurance or homeowners insurance rather will be able to cover your stuff, at the outside of your home. But it will also be able to cover the stuff inside your home too. okay so if you have a claim on you know your couch, your TV, maybe a really fancy I don't know a dresser or you know an heirloom you know something big right, your appliances right I mean you can get a separate insurance on your appliances and quite frankly you can get separate insurance on the stuff in your home. You don't have to write that under your homeowners insurance, but you can write. They’ll give you an amount that you can claim.

But you know USAA is really good too because they've got a really good property, personal property insurance policy and that's something that you should also maybe consider you know take a look at that. Okay so that's homeowners insurance okay. Let’s talk about the next one. Which is a little bit more you know closer to the craziness that everyone's worried about. Here in the Hampton Roads area right flood insurance, flood insurance is huge if you live in a flood zone guys. Okay well I'm going to tell you right off the bat it's necessary if you live in a flood zone okay.

If you live in a flood zone and you're getting a mortgage on your home, it is mandatory for you to have flood insurance. So you better go ahead and start shopping for rates. Because no bank is going to lend to you without getting that insurance all right, hands down. If you are buying the property cash and you decide you want to take the risk and not get flood insurance, that's up to you. Because it's your money.

So you can choose to be in short or not. I do not know if there are certain counties or states that require you to get flood insurance that may be a thing. But from what I've heard typically that's not and if you're investing your own money then it's really it's on you. so again you know just good habits get the flood insurance if you live in a flood zone and if you don't know if you're in a flood zone or not or you want to verify to make sure you're not or you are in one you know whatever the case may be for you, take a look at what are called flood plains okay.

Flood plains are stuff that you can actually look up on Google and you can search in your county records. Your county records should have flood plains right that will show you based off of the area you're in you know what elevation you're at and there are certain zones a lot of them are color coded. some of them will also have a map essentially right of each of the zones and show you where water rises in your area you know like so you know how some areas are seasonal right where the water sources around them as a stream of it's a lake or whatever right will elevate over a certain season. It’ll show you how high those elevations get.

So it can also show you if water is going to be anywhere close to your property you know and obviously all these are averaged out right I mean it's not like its a hundred percent accurate. But you definitely want to keep them in mind when you're buying your property. Because if you're not looking for a property in a flood zone, you know one of these records is good for you to take a look at prior to closing on that deal or put an offer on the deal.

Because you may never know right. I mean  I've heard of you know stories where the sellers won't even know that in a flood zone maybe they own or inherited their property you know from family or whatever right and held the property for years and years and nothing has ever happened, so they try and sell the property they don't know it's in the flood zone; so they don't you know mention it and then someone goes and buys it from them and none of the research is really done so they don't know if it's in a flood zone or not and then BOOM and you find out or you find out when it's too late that would be terrible right.

That would absolutely be terrible. So definitely make sure that you do due diligence and if you're buying with a VA loan right, this is one of the things that they usually check for. So don't be too worried about it if you're getting your home maybe this is your first time home or whatever right if you're a first time homebuyer, usually your insurance companies or the VA right will do this research for you and you'll find out. But don't leave it to someone else to really dig this information for you. You know we like to teach you guys that it's a smart to be independent.

Especially when you're trying to become financially independent right. These are there's things you need to know and stuff to get in a good habit of doing. So just go ahead and check to see if your property's in a flood zone and if you're going to need flood insurance and flood insurance can be very expensive guys. So make sure you shop around for this as well. Again you're looking for the most coverage with the least amount of deductible.

All right and at least my payment honestly that too right. So that also goes that same. Anyway awesome okay cool so we've got homeowners insurance, we've got flood insurance all right let's talk about umbrella insurance. 

Umbrella insurance is a little higher level. you don't need umbrella insurance if you only have one property and you plan on just living in this one your entire life and you don't plan on you know investing anymore. Okay that's fine. Umbrella insurance may not be anything that you really need or maybe you do right. But what is umbrella insurance? Let’s talk about it. Umbrella insurance is an insurance that literally acts like what it sounds like right. It covers you for like anything I mean anything.

You know you can go to umbrella insurance and you know pick up one policy that can cover you for all your rental portfolio, it can cover you for your auto included can cover you know health and involve I mean I've seen some crazy umbrella insurance policies out there. I don't personally have one yet simply because I have not built a portfolio that I want to you know put a policy on yet. However once I get to my goal of ten properties then I will get my umbrella insurance policy and then it'll make sense to me.

You might think differently maybe you are an investor that you say hey once I get my second or my third I'm going to go ahead and get an umbrella insurance policy, that it's quite okay. All right you can do it however you want. But I will just say that you know for me right it'll make more sense for me to do it once I hit that ten mark and right it doesn't matter. Again you can use umbrella policies for whatever you want. But they are important because these umbrella policies can cover you when a lot of other insurance policies can't right. You always hear those onsite twosome stories about you know the flood insurance that didn't cover someone for this particular flood.

Because it was caused by something else and you know the insurance just you know gave him a hard time and said that yeah you weren't covered because of XYZ or for instance like a fire right. the fire was necessarily caused by you know something on the outside, it was caused by something on the inside and because this one thing, this one thing that wasn't in all your policy started your fire then you know they now your house is no longer covered by insurance and blah blah blah blah.

So I know it sounds stupid but and again these are extreme examples and all stuff that you can you know try and mitigate when you communicate with insurance provider right ahead of time. But you know again an umbrella insurance is good to have. Especially two if you know anyone breaks there, I don't know it breaks their leg or you know trips and you know I don't know impales themself on your property you know something random right.

But an umbrella insurance can also cover for you know medical bills of that said person you know what I mean. So that also helps out a lot. So keep in mind when you're going your portfolio umbrella insurance may be something you want to consider and definitely look into it into each policy to see what you can get covered for or you know whatever right. 

Okay and then and then let's talk about one last insurance policy that a lot of people think about. Maybe a lot more people are starting to think about it now. Because I've heard a little more people talk about it now but life insurance. Okay now life insurance is a very very good thing to have.

Now I know I'm going to be you know turning off some people here because they're going to say Oh life insurance blah blah blah not again not one of these things. Listen all right I'm going to tell you right now there are a lot of smart people out there that have multiple life-insurance policies and just by that fact alone right smart wealthy people having them, I'm going to give it the time of day to learn.

Okay because I'll tell you there are a lot of not smart you know poor people out there that don't have life insurance that die all the time and leave their family and a whole lot of debt and I know firsthand that, because I've seen a lot of that in my family okay. So I'm not saying that my family is you know dumb or anything like that right. But I come from a lower-income family and I can tell you from experience that I'm not having that education in my family has caused a lot of pain and grief in my family situation right.

Okay so I will tell you now having learned the knowledge that I have on life insurance that is completely set not only myself up right, but the generations that are to come in my family. Because I have committed myself to educating my entire family on life insurance and the importance of it and how we can better each other right by having it. Okay so anyway I'm going to get off my soapbox there. But all right life insurance is great.

Okay life insurance can be really really good if you have some great policies. All right especially ones that allow you to have a little more flexibility and I'm going to get into that briefly. But there's going to be a much bigger lesson on life insurance policies that allow you to Bank on yourself so to speak right. [19:42 inaudible] to take more control of your finances and take it out of the bank's hands and create you know your own a separate account that you can use to loan money to yourself and pay yourself back with interest right. That’s essentially how we're I'm going to go with that one. but on the separate note right just in general life insurance is great because god forbid anything happens to you, you can now take money and you can give that to your family to pay off the hefty debts that you build up from buying rental properties right or just properties that you're living in in general right.

So let's say you put you know four hundred and forty thousand dollar property in your name and now you know again you bought it with a VA loan and you go out on deployment. God forbid you know something happens and you end up paying the ultimate sacrifice to your country, you know god bless you for that; absolutely amazing and yes maybe you have you know SGLI right. The service member’s life insurance policy which is great. But that's term life insurance okay. That’s not whole life insurance and I'm going to get to that in a little bit too. But maybe you get that policy and maybe that policy is enough to cover you know your home and maybe a little bit more. But let's say maybe you had more debt or let's say you bought three properties during your time in the service.

Right you bought you know three different ones in different areas and total you may have a portfolio that with all you know equity together might be worth like six hundred thousand, eight hundred thousand dollars, which is great. But you're seven or five or however many hundreds hundred thousand dollars in debt because you haven't paid them off yet. 

So no matter how big your portfolio gets, if you haven't paid off your debts to those banks you are in debt and you're going to owe money on those loans. Now if you have life insurance to cover all of the debts that you have with these properties and something happens to you, your families set right. they'll cash in from the life insurance policies they can pay off these homes that you have and now your family is left with a net worth of you know X amount of dollars because they have three or four or however many properties paid off in full, because you've left them with a nest egg that allows them to have you know full control of the equity of these homes and if they're all rental properties that's even better.

Because now that they have no debt, they have very little to pay off and they're starting to make money off these other rental properties. So you've not given them a paycheck. So you've given them full equity on these homes. You give them a paycheck all right and an awesome nest egg for them to build upon for their future. Does that make sense? all right so life insurance is amazing and if you don't have it and something goes wrong, then you know now you leave your family with a whole bunch of debt and now your family has to pick up the pieces and figure out how they're going to pay off all the things that you owed and left them right.

Okay now I'm going to rewind a little bit. I briefly mentioned something about term and hold and so I'm going to go ahead and I'm going to talk about those real quick okay. 

Term life insurance is something that you pay small payments on for a particular time that you want coverage. So for in the military all right let's use military for example. The moment you stepped off sup down from the service and you no longer pay for that service anymore, the policy anymore you're not covered okay. If you miss a payment in the month you're not covered right for that month. It’s just how term works okay and so if you're not paying you're not covered and blah blah.

But if you have what's called whole life insurance right, you set up a policy that you pay a certain premium each month but your premium is under the amount of money that you put towards your policy each month. So let's say if you have a premium of 100 but you're paying $300 into your policy every single month right, so you have a policy that's worth five hundred thousand but you're paying 300 that difference from the premium that you're paying and the money that you're putting in, alright that builds up what's called cash value.

But everything that you pay them go straight to their pocket and you collect none of it. For whole life insurance anything you pay that is not part of the premium right goes to your pocket all right, goes to your account right and that account bears interest over time. Doesn’t bear a lot of interest okay. It does not bear a lot of interest. we're saying maybe you know similar to the G fund and TSP. but you're growing that cash value so you're saving it and it's you know making about what you know the inflation rate is or a little bit more each year.

So you're saving money and that's essentially what you're doing right. Don’t ever let someone tell you that life insurance is an investment. It can be if you get a policy that you put your cash value into you know a heavy interest bearing account right. But the more interests you try and make off of your life insurance the more at risk you're going to be to the market swings. At least in certain whole life insurance policies right you'll have a little more coverage and safety on it and even some that protect you for heavy dips in the market.

So you want to be able to be smart and look for you know opportunities like that to get involved in. but life insurance again like I said can be an absolute huge factor in you know the future success of your family, god forbid something happens to you and we're all in the military okay. We are all in the military.  If you're listening to this maybe you're not in the military anymore. But if you are in the military and you are listening to this, you are always at risk.

That’s what I'm trying to say okay. you are always at risk and I'll tell you why, doesn’t matter whether you think that you are not in the line of fire, right you're not in a combat zone you're not in a you know whatever you can just be underway on the ship in the middle of the night and something happens you run aground right, you collide with another ship anything happens we just experienced it right. We lost some sailors last year and it's huge.

It’s a huge impact and that ripples across the fleet that ripples across the force it ripples across the military you know something as simple as a transit and you lose some folks right. We lost some soldiers in a training exercise last year as well. All right it happens all the time. It happens all the time okay. Something as simple as training something you do maybe you know how many times a year and something happens all right.

Now I'm not trying to put a damper on today's podcast. But it's something real and something that is absolutely 110 percent real and we all need to be ready for it guys, we all do all right. Active duty and reservist alike. Even veterans okay. I mean I can't tell you how many veterans we've lost used to you know poor medical treatment afterwards. Right the VA is not perfect. I should not have to tell anybody on this podcast that. The VA is not perfect when it comes to medical care okay. I'm pretty sure we've all heard horror stories out there and you know, no offense if you work there guys I'm sorry if your listen to this.

But hey if you work there you should probably know too. Not necessarily the best care. It may be the cheapest care, it is not the best care. Really really sorry for something like that. But hey you know and if you're able to set your family up for success, think now. be proactive and set your family up for that what if you know hey that's great or even better maybe if you don't have all the properties out there, but you have an intention on buying something, you're getting your family's by starting on it and you have a little bit more money through insurance policies than you have properties and now all of a sudden you leave your family with a lump sum of six hundred thousand dollars that now they can go do and do what with oh well they can go and now they have the money to buy these rental properties to build themselves passive income and live on past your legacy thanking you right their service member for not only instilling them with the knowledge to sustain themselves past your death.

But also now giving them that lump sum, that nest egg that they needed to get themselves started. That is beautiful man, absolutely beautiful. So anyway I'm going to stop talking about this sad stuff now. But it’s just something you want to think about right. I mean and when it comes to insurance again it's all areas of insurance guys okay. You don't want to be the one that you know has a rental property where someone you know breaks their toe and is now coming after you for everything that you own okay. I've mentioned in other podcasts before about liability right you don't want to have rental properties in your own name.

But you certainly don't want to have a rental property without a level of insurance that can handle the stupidity that may follow with, just people try to sue you for everything you know what I mean. so that's definitely that you and you also want to protect your own home for a loss you know that random grease fire from that party that you wanted to have or you know the electrical outlet that decided to go rogue and catch fire and you know burn your accent wall it's made of wood right. so now I'm saying this as I'm looking at my living room and I'm seeing the outlet that I carved in my wall.

Yeah so praying to God that that outlet doesn't go rogue tonight. But you know just something you want to think about right. So I'm just saying guys definitely definitely make sure that insurance is part of your game plan when you are factoring in the numbers in your property and your little ORM like the code call my operational risk management that you're planning for your investing future okay. 

All right guys that's really it. That’s all I've got for today. Thanks so much again for listening and I hope did you guys pray for me out here. Pray for everyone here it's in the Hampton Roads area okay. I think people are losing their minds a little too prematurely. I don't think that the storm is going to hit us as hard as possible and you can quote me on that right. I'm sorry as hard as they say that it's going to.

So I mean I'll be alright you know we'll see, we will certainly see. But anyway thanks again guys for listening again. Make sure you hit us up on www.activedutypassiveincome.com. Check out our page, check out our start spark Club. If you're not a member be a member it's an awesome place to be. We’ve got a lot of changes going on here.  Hit us up on our Facebook or Instagram there's so much stuff going out there.

Hey if you are in the Hampton Roads area and you make it through the storm, next week we're celebrating at the Keegan's Irish pub for our little meet up. It’s going to be great. All right I'm fully expecting everyone to be there and share their awesome hurricane party stories. It’s going to be so much fun, cannot wait to see you guys out there alright. Mike Foster I'm out of here.

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