Buying Insurance for Your Real Estate Investments – Get The Strong Coverage You Need in 2023
When you decide to invest in real estate, you are taking a risk. Property values might fall, tenant demand may drop, and you just have to live with those risks. However, you should never take a bigger risk than you have to.
As a wise real estate investor, you want to make sure all of your investments are properly protected from any unexpected circumstances. That means you need to start by buying insurance.
So, let’s take a look at all the different types of insurance you can get and why they are important for you as a real estate investor.
But first, before you start buying insurance it is important to get an idea of what lenders are looking for. After all certain lenders will require you to get certain types of coverage when buying insurance for a property they are funding. To lean more, click the link below to book a free strategy call today.
The Importance of Buying Insurance
First and foremost, you need insurance because it protects you and your investments in the event something goes wrong. Frequently, certain forms of insurance are already going to be required by law simply because you own the property, but even if it is not explicitly required, buying insurance policies on your investment properties (and personal properties) can wind up saving you thousands of dollars in the event you end up needing to use your policy.
Landlord Insurance
Landlord insurance is similar to home insurance is meant to protect you as the property owner in the event that something goes wrong on your property. However, unlike standard home insurance which is designed with the expectation that you will be living on the property, landlord insurance is structured to factor the fact that your property will be occupied by someone else.
Sometimes, these policies are required by mortgage lenders in order for you to qualify for their products. This is so that they know their investment in your loan is also protected and you can continue to pay them instead of defaulting on your loan, even in the event of an emergency.
Landlord insurance covers a variety of factors regarding the property, such as:
Liability Coverage
Much like how liability insurance on your car protects you from being held liable in the event of a car crash, liability coverage on your rental properties protects you from being held liable for any harm or injury that occurs on your property.
That means in case of an emergency, you can rest easy knowing that you will not have to deal with an expensive lawsuit for anything that is not your fault. This can include tenants slipping and falling, or a trespasser getting hurt on the property.
Property Coverage
Naturally, when you are buying insurance, you want the property itself to be properly covered and protected from any damages. This can include damages caused by the tenant, as well as damages from other insured causes such as fire, vandalism, or extreme weather. This can help you afford to repair your property and get it back into working order in the event something happens.
Additionally, many policies will include provisions for landlord belongings such to protect appliances and equipment owned by the property owner. This provision will not cover tenant possessions, which instead are covered under renter’s insurance.
Loss of Rental Income
This provision is in place in the event that the unit suddenly becomes uninhabitable due to damages or other extreme circumstances and the tenant is forced to move out. During this period, the landlord cannot charge the tenant rent, so the insurance provider will pay the landlord fair market value for the property for a period of time in order to rehabilitate the property.
It is important to note that this will only cover the amount of time needed to complete the repairs, and not the time it will take to find a new tenant. So, if you take three months repairing the property and one month finding a new tenant, the insurance provider will only cover you for the first three months.
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Additional Insurance
While not explicitly included in landlord insurance, there are additional forms of insurance that you may want to obtain. This can range depending on how you plan to use the property, but some of the key types of insurance you should look into while buying insurance are:
Flood Insurance and Water Damage Protection
If you live in a flood zone or are concerned about dealing with water damage from a potential flood, you may want to look into buying insurance for that specific circumstance. However, most flood insurance providers do not include water damage from other sources such as extreme weather or sewer backup. For these cases, you may want to find a provider who includes these cases or offers these circumstances as add-ons to your existing insurance policy.
Disaster Insurance
Disaster insurance may not always make sense if you are not in a region that normally has to deal with things such as tornados or earthquakes, but if you are, it may be a good idea to consider buying insurance to cover damages that could occur during these events.
Non-Payment of Rent
While it can be expensive, it may be valuable to consider buying insurance to cover non-payment of rent. If a tenant is not paying rent and you need to evict them, your insurance provider will frequently pay you up to a specified period while you are not receiving rent in order to keep you covered during the eviction process.
Bonus: Tell Your Tenants to Get Renter’s Insurance
Lately, many landlords and real estate investors have been asking their tenants to get renter’s insurance – and for good reason. Not only can this protection cover the tenant’s belongings, but it can also protect them from being held liable in the event a guest or trespasser gets hurt on the property. It may also cover the cost of living if a tenant suddenly can no longer stay in the property and needs to pay for other accommodations until they can find a new place to live.
Staying protected in real estate is not always about buying insurance, in fact, sometimes all you need is a good mortgage. To get started today, visit us at LendCity. You can find us at LendCity.ca or you can call our office at 519-960-0370 Alternatively, click the link below to book a free strategy call at the link below.