As a real estate investor, depending upon your chosen niche, your particular circumstance, your vision, and your operative game plan moving forward, you need to understand the value of insurance protection and the need to have one or more insurance agents and programs at your disposal as a necessary cost of doing business and protecting your assets. It is always a function of risk, reward, and the protection of assets. There are several types of insurance protection to consider. The list offered here is by no means comprehensive for all situations.
When considering insurance, the standard homeowner’s insurance policy comes to mind first and foremost. With these policies, the following coverage is fairly standard. The basis is the dwelling coverage, providing home structural protection including floors, walls, ceilings, built-in appliances, and any attached structures. Several perils are covered as well including fire, theft, vandalism, even hail, and will cover you up to a total loss, at least to the policy limits. Contents coverage protects items within the home place including furniture and clothing and should there be a coverage incident, insurance will reimburse the policyholder for the value of items damaged or lost as defined within the policy. Other property damage coverage is also covered if your property is damaged because of a covered accident. Personal liability protection, which consists of bodily injury damage coverage, will pay for damages that occur from certain accidents, again as defined by the policy.
A standard homeowner’s policy does not and will not cover everything, no matter the policy limits. That is why it is sound business practice to have on your investing team one or more insurance specialists to best serve and protect your interests and assets with customized insurance protection. When optional home insurance coverage is contemplated, there is replacement cost plus coverage available for an extra level of protection, additional coverage to rebuild a home after a total loss, earthquake insurance, sewer and backup coverage, and other structural coverage to cover unattached property even an unattached garage. There is even ordinance and law insurance protection for an older home if there is a need to rebuild and comply with current building codes after a covered loss. There may be a need for personal umbrella liability coverage for bodily injury, or property damage beyond the policy limits outlined in the basic policy. Medical payments coverage may provide payments for medical expenses resulting from an accident on an owner’s property. Many carry their own deductibles or are additionally purchased insurance riders to the basic policy. Then there is flood insurance which protects a home and belongings from flood related damage and is something never covered by a basic homeowner’s policy. It is a separate policy with its own deductible.
As an investor landlord, with the proper insurance in place, you can insulate yourself and your business from losses that could create financial havoc. There are master policies as well as individual ones that provide hazard and fire protection, liability and flood protection, builders risk insurance, general contractor coverage, even workman’s compensation, as may be applicable. Having an umbrella policy for additional liability protection may be a sound business investment.
As a lender and homeowner, having title insurance coverage is sound practice. Title insurance is issued after a careful examination of the public records and protects the insured from risks disclosed by a public records search but from title problems that may exist that cannot be disclosed by that records search. Always obtain title insurance even if not required by the lender.
There are insurance issues in all aspects of private money lending, from the protection of a lending source by the investor to the lender itself. Proper and adequate coverage must be considered and timely in place for the protection of all. Property insurance for hazard, fire, and liability should be considered with every transaction. The parties must be insured properly, for the right amount, and at the right time.
Liability insurance protection and umbrella coverage, offered under a business owner’s policy (BOP) covers an investor, the investing business, and any owned assets, all too often overlooked and yet necessary. A real estate investor and his or her business are always potential targets for lawsuits and even with entity protection and best efforts taken, all it takes is one law suit to ruin everything.
Seasoned investors know to seek out professional insurance agents to discuss their particular needs as part of sound game planning. Investors need to be smart about their insurance needs. Is the policy presented competitively priced for the coverages and deductibles? What level of insurance coverage purchased is sensible? Finding the right insurance professional is critical. Shop around and network, network, and network some more. It all comes down to educating yourself in all aspects of a real estate investment and insurance should be something to consider. Having the right insurance coverage is yet another facet of sound business practice
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