Determining Cost & Coverages for a New Senior Living Community

If you’re in the market for purchasing a senior living community, you might not be thinking about insurance as a priority, but you should. Asking those key questions when the purchasing process begins can save you a lot of headaches, time, and most importantly, money. Let’s take a moment to focus primarily on the financial aspects pertaining to the assessment of insurance costs.

When the seller presents the costs related to insurance, you must have the utmost diligence as you’re dissecting them. I’m constantly amazed at how many times I’m presented with current insurance costs based on what has been provided by the seller only to find out later that this is the exact opposite of what you, the conservative purchaser, is looking for.

When inquiring about insurance costs, be sure the seller identifies different levels of the self-insured retentions and limits for their current liability insurance program, as well as retro dates and/or tail coverage that may be in place. These are major components in determining cost allocation and can allow us to better determine a realistic number for your pro forma. Basing that line item using the seller’s numbers can potentially give you an inaccurate cost analysis. In addition, a seller’s requirements from their lender might be inconsistent with what your lender is requiring. This does not only apply to limits of coverage. It also applies to retention and even the strength of the insurance carrier itself.

A thorough review of their workers’ compensation program is also important when determining costs and coverage. The seller may have a master policy, or a loss sensitive program. This would make their premium seem lower, while the true costs factoring their loss experience are something entirely different.

These are important things to consider when purchasing and insuring a new community. It’s not this writer’s suggestion that one should forego a lucrative opportunity based on insurance considerations alone. However, if an informed buyer makes sure to do their research, ask the right questions, and demand certain information upfront, it’ll save time, energy and resources. Most importantly, it will give you a better picture of the asset you’re about to purchase.

Of course, these considerations should be reviewed with your agent as far in advance as possible. Your agent should be able to map out a strategy that will offer the expertise necessary to review these concerns and deal with them in an appropriate manner.

Considering purchasing a new senior living community? Chat with an MMA advisor to learn how you can minimize risk.

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