Insuring Your Investment Property
Real estate investing has great potential for adding to your personal wealth, but that also means that it also has greater potential risks. Protecting your real estate investments can be done with foresight and the right type of insurance so that you don't run the risk of losing out because of a risky sale, purchase, bad tenants or lawsuits over just about anything related to your property.
Most real estate specialists will recommend that you get both title insurance and liability insurance any time that you're purchasing real estate. Title insurance protects you in the event that any lapses in the title are found before you close on the sale. All property sales include a title search that will make sure there aren't any outstanding liens on the property or legal disputes involving the land or house that could cause problems or question ownership rights. On rare occasions, even a professional title company will miss something - title insurance covers this eventuality. If something is missed, the insurance will cover any liability that could fall on you from missed liens, property line disputes or other unexpected problems that might arise at the last moment.
Liability insurance is exactly what it sounds like - it protects you from liability when someone else is injured while on your real estate property. We've all heard about people being sued because someone tripped on a cracked sidewalk while delivering pizza or broke their arm because a chair broke underneath them in your home. Liability insurance generally covers medical costs, rehabilitation, in some cases lost wages and any damages the injured party might sue for. Sadly, there are hundreds of lawyers out there teaching people how to sue for just about anything – and you are a prime target.
Additional Coverage's
There are several other types of insurance you can get as well to cover against other unexpected events, including Hazard Insurance to cover what are termed as "Acts of God" that aren't usually covered under standard property owner's insurance. These include everything from Hurricanes to frozen pipes. You can also get insurance to cover losses because of power outages, vandalism and a host of other events.
If your real estate is rental property, you should protect yourself against tenant problems such as property damage by tenants, renters who flee without paying, and tenant disputes. An Umbrella Liability Policy will protect you against liability if you have someone work on your property and they are injured and blame you.
Any of these policies will have a range of prices depending on how much coverage you get and what kind of deductible you choose. Cost will also vary depending on the value of the property and what part of the country it's located in.
There is one other type of required insurance that you'll have to pay for, but not for your own benefit. If you have a mortgage on your property, the lending institution will insist that you get mortgage insurance to protect their investment. This way, if you default on the loan, they get their money.
So how do you weed through this vast amount of insurance needs? After all, at some point the cost of insuring every risk could make the prospect of investment property unaffordable. How do you determine if you should have a Business Owners Policy (BOP), or just a Landlord Policy? Is a million dollar Umbrella Policy going to sufficiently protect your interest?
As with all real estate investment issues, we recommend you work with a professional who understands real estate investments and will help you wade through the insurance options available to you. In Washington, that person is Barry Doll.
Barry is a licensed Insurance Agency Owner who has an MBA in Personal Financial Planning and is and AE Certified member of the NSIG. His knowledge and experience makes him uniquely qualified to handle all your insurance needs.
Barry Doll, MBA
Barry Doll Agency
Port Orchard, WA
Desk (360) 876-7166
Cell (360) 620-8625
Fax (888) 284-6818