Asset Protection By Using Insurance

[Justin Sloan]

When you are starting out your real estate investment business make sure you have the proper team in place to guide you through the process. One of the biggest issues I see, as a licensed insurance professional that focuses on the real estate investment insurance space, is that so many investors buy insurance from the same person who helped them with their auto, home or some type of insurance. This can be a catastrophic event waiting to happen you and you thought you were doing the right thing by getting the coverage but guess what, you bought the wrong coverage!

I recently spoke in front of 60 members of CTREIA (Connecticut Real Estate Investors Association) and the topic was "Asset Protection" - below are just some of the talking points you need to think about when getting into being a landlord or flipping properties!

FOR LANDLORDS

• Require Renters Insurance (for your tenants) in rental contract / lease agreement - you can use this as a tool to potentially evict a problematic tenant!!
• Minimum liability limits of $500,000 (we recommend also having them buy a personal umbrella!)
• Require that YOU (whatever the entity  / person(s) is that owns the building) are named as an additional insured (landlord)
• Create Google sheet document with a list of tenants names, insurance company, policy number, effective dates and request new certificate of insurance every year. You can even set this up as an automated email template and if you have a good insurance agent they can help you do this!

FOR LANDLORDS: THINGS NOT ALLOWED BY YOUR TENANTS

• No Pools
• No Hot Tubs
• No Trampolines
• No Grills On Decks - OK away from property
• No Hammocks on decks
• No Zip lines

THINGS TO DO AS A REAL ESTATE INVESTOR

• Always "Insure To Value" or Get Agreed Value Policy (don't insure your property based on what you bought it for / market value)
• Always Collect Certificates Of Insurance from Contractors (get named as an additional insured - ask your lawyer to draft up a subcontractor agreement with a section that has certain minimum requirements for insurance)
• Buy An Umbrella policy 
• Put Each Property In a LLC - this will protect any liability against your personal assets
• Have a Solid Risk Transfer Contract in place with both tenants as well as contractors. I can Send you a Free Contractor Agreement
• Make Contract for Subs to "Lock & Secure Premises after each day"
• If you Flip Properties - buy a General Contractor / Remodeler insurance policy called General Liability (GL)
• Also always buy General Liability (premises liability) for each Project
• Always purchase "Special Perils" - Basic and Broad perils are NOT GOOD!