What type of insurance coverage do you need for your rental properties?
Rental property owners need insurance coverage. You may not love making premium payments, but you’ll be glad you’ve got it when something happens. If you plan to finance real estate investments you’ll often also find that insurance is mandatory.
Here are five types of insurance coverage you need to know about…
1. Title Insurance
Title insurance covers your rights to ownership and use of the property and helps cover legal defense if issues arise. You do not want to buy property without this. Every dollar of your investment and future income can be on the line. There is a lot of fraud out there today, and without title insurance, you are at risk.
2. Hazard Insurance
This is your basic property insurance. It typically covers fires and other common forms of damage. This is usually based upon the amount of the loan you have on a property, or the cost to rebuild the property. Make sure you keep the amount of coverage updated as your property value increases.
3. Special Disaster Insurances
Basic hazard insurance is very limited coverage. It typically does not cover a wide variety of other natural disasters which can destroy your property. If you are in a flood zone you will typically need special flood insurance. This is normally very inexpensive. Those in coastal zones may need windstorm or hurricane insurance which also can be very expensive.
4. Renters Insurance
Hazard insurance doesn’t cover tenant belongings. You don’t want to be on the hook for your tenants’ furniture and personal items if there is a fire, flood, or break-in. Typically, landlords will require that renters obtain their own renter’s insurance, at their own expense. This should be laid out in your lease.
5. Umbrella Policy Insurance Coverage
There is generally a discount when you group all of the properties together and this also provides ease of management. If you do enough deals, and own properties long enough you’ll run into something. Often loopholes in the above policies will mean you aren’t covered by them, or they may not provide enough coverage. An umbrella insurance policy can be used to cover you and act as a second layer of protection across all of your real estate business and assets. This can help cover issues like “dog bite” lawsuits.
Keeping in mind the need for all types of insurance coverage and this will make your property management experience a smoother and less risky endeavor.