Insurance Considerations for Rental Property Investors

Contributing Writer, B2R Finance | Insurance,Landlords,Real Estate

Insurance

In any kind of real estate investing, making money is typically the primary goal. When investing in property rentals and single-family homes, you must also consider spending time and capital protecting your gains and making sure they aren’t jeopardized through a criminal act, by a tenant’s actions, by an act of God, or just random misfortune.

For a real estate rental property investor, understanding the proper types of insurance and how much coverage is needed are critical for your business and overall success. It’s not enough to sit back and expect a standard homeowners policy to take care of your protection needs. Below are three types of insurance and points to consider as they apply to rental home real estate investing insurance:

Liability Insurance

Liability insurance provides protection and liquidity against people who claim to be injured as a result of something that occurred on your property, or a property owned by a corporation or LLC controlled by you. It’s not just swimming pools you have to be worried about. Consider the following:

  • A contractor is injured while working on your property
  • Neighbors or guests slip on ice, on your sidewalk, porch or driveway
  • A tenant gets sick because of a carbon monoxide or gas leak in your home
  • A fire that starts on your property spreads to other properties

Liability insurance can protect you, your company and investment in cases such as these.

Dwelling vs. Homeowners Insurance

Generally, real estate investors should be covering their investment properties with dwelling policies and not homeowners policies. The difference: A homeowners policy covers belongings in the home too. Most investors don’t need that much coverage. A dwelling policy covers the building itself.

Vacancy Considerations

Most standard home insurance policies contain exclusions for vacant properties. To fill the gap, you will likely need a special kind of coverage called “vacant property” coverage, or consider buying a rider on an existing homeowners policy if you have a tenant moving out.

Courts have defined a vacant home as one where there is not enough furniture or appliances to reasonably allow someone to live there. An issue could arise if you have a standard homeowners insurance policy and an incident of vandalism or arson occurs that causes significant damage to the home. If you had removed the furniture and appliances, your insurer could well evoke the “vacancy exclusion” to get out of paying the claim.

Research all of your insurance options with an insurance professional to ensure that your rental properties are covered. While most people see insurance as an expense instead of as an investment, you’ll be thankful that you spent the time and money to secure the right policies when you need them. Visit us at www.b2rfinance.com and follow us on Twitter @B2RFinance.

The information on this page is provided for informational purposes only and does not constitute investment, real estate, or legal advice. This information should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. No representations or warranties whatsoever, express or implied, are given as to the accuracy or applicability of the information contained herein. The information may be modified or rendered incorrect by changes in the marketplace or developments in the law, or for any other reason, and may not be applicable to any individual reader’s facts and circumstances.