Real Estate Investment Insurance explained

What is Real Estate Investment Insurance?

All real estate owners need proper levels of insurance coverage that will provide the enough comprehensive protection for their investment portfolio. A reputable insurance provider with the right experience and connected access to a wide range of insurance markets can make the process a great deal more efficient.

This leaves the property investor free to focus on the really important issues, managing multiple properties, maximizing the returns on investment, and minimizing the outgoing expenses. However, all real estate investors are always at risk of events that are far outside of their own control that can result in property loss or damage, such as fires or flood damage and even personal injury claims. Knowing what your insurance policy actually covers is going to be critical.

Property Loss Insurance

This type of insurance is a definite requirement for any real estate owner or landlord. It protects against physical property damage due to fires or other hazards. An investor should also make sure that these policies cover the costs of full reconstruction, market value of the property, and the actual cash value as well.

• Consider adding Sewer Backup Insurance for some extra protection. The extra cost is very minimal.
• Consider adding Flood Insurance if your property is actually located within a designated flood zone, perhaps nears rivers, lakes, or hurricane areas.
• Consider adding Equipment Breakdown Insurance, especially for owners of multi-family dwellings. The expenses associated with the replacement of an HVAC system, for example, can be extremely costly.

Liability Protection Insurance

This type of insurance is another “no-brainer”. Policies can be purchased for the individual properties as well as for the real estate investment business enterprise itself. The last thing that any landlord wants is to lose massive amounts of assets due to an accident or personal injury claim made by a tenant or visitor to the property. A simple slip and fall incident, for example, can rack of potentially millions of dollars in unforeseen financial damages.

Business Insurance

Running a successful real estate investment firm is more about business management than it is about real estate. All businesses are based on a smooth flowing operation of the buying and selling of some kind of product. Your product just happens to be real estate. There are all sorts of potential financial losses other than property damage or personal liability claims that you need to look out for.

• If you are a typical landlord or lease-purchase property owner, consider adding Loss of Income Insurance. This covers the possible interruptions of regular tenant cash flow that are needed to service your mortgage and cover your regular expenses.
• If you purchase property that is either vacant, nearly vacant, or bought with the intention of immediately renovation, consider adding Builder’s Risk Insurance. Be sure to do your homework first. In some cases, you may already be covered by a professionally insured and bonded general contractor.
• However if you are personally renovating the project yourself, you might want to consider acquiring some General Contractor’s Insurance. This will allow you to get your own permits while protecting you from potential vandalism or slip and fall claims from employees or subcontractors.
• Worker’s Comp Insurance is always needed if you have payroll employees of any kind, such as property managers, maintenance workers, receptionists, and even if you are appointing a resident tenant to collect the monthly rent checks.

Other Insurance Considerations

Did you know that owners of 10 or more properties, either single-family or multi-family homes, may be eligible for a Multiple Dwelling Insurance program? Make sure to ask your insurance agent. Many of these programs make the insurance management process a great deal easier as individual properties change in status from “vacant” to “under renovation” and “occupied”. Usually, all that is required to change a property’s status is a simple phone call or email.

• Commercial Real Estate Insurance

It just makes good common sense that owners of commercial properties, like shopping malls and car dealerships, will be at a much higher risk for personal injury and liability claims than the typical landlord. As a result, your insurance coverage needs to reflect this additional risk. Even in cases where the business owner is leasing the commercial property rather than owning it outright, a reputable insurance provider can help you determine the proper levels of coverage that you should carry.

• Apartment Building Insurance

Ask your agent about the various policies of Apartment Building Insurance, too. There may be some special programs available for owners of individual apartments, multi-family properties, and even for owners of larger numbers of apartment builds. These policies might also cover the transitions from vacant to renovation to on-the-market while simultaneously include a minimum level of Builder’s Insurance as well.

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