5 Types of Insurance You Should Consider Having as a Real Estate Investor
As the owner of investment property, it is essential to have all of the proper insurance coverage in place. Not only is it a legal requirement to have certain forms of insurance, but having insurance coverage will also help to protect your financial investment. To that end, here is a look at some of the types of insurance that you may need or want to have as a real estate investor or landlord.
Property insurance provides coverage for the actual structure. Property insurance provides you with compensation is something occurs to diminish the value of your property. When obtaining property insurance, be sure to consider whether the policy offers coverage for the appraised value of the replacement cost. While the appraised value will provide coverage based on the estimated value of the home before the incident, the replacement cost will cover the actual cost of repairing the home. This may or may not be more than the appraised value depending on the damage and how it needs to be repaired.
Liability insurance provides you with protection for your physical property as well as for your investment business itself. With liability insurance, you are protected if something bad happens to someone while on your property or as the result of your actions. Examples of incidents that are covered by liability insurance include falling down stairs, being injured by faulty construction and tripping on the sidewalk.
Insurance for Various Perils
A variety of different types of perils can cause damage to your property. Therefore, in addition to having basic property insurance coverage, it is also a good idea to have coverage that provides protection from perils such as the ones that follow:
- Burst Pipes
- Swear Backup
- Weight of Ice and Snow
Some of these perils are covered in the most basic of property insurance policies, but others may need to be added on at an additional cost.
Of course, when it comes to flood insurance, you only need to obtain the coverage if your property is located in a designated flood zone. If the property is located in an area where you are nonetheless concerned about potential flooding, however, you may still want to consider obtaining this additional coverage.
Loss of Income Insurance
As a landlord, you may want to obtain loss of income insurance in order to ensure a steady income even during those times when you are without a tenant. Loss of income insurance can often be added to a hazard and fire insurance policy as additional protection in the case of such a disaster.
Builder’s Risk Insurance
If you have purchased a vacant or mostly vacant property for which you are planning renovations, you will want to obtain builder’s risk insurance to protect your property against vandalism, contractor injuries and property damage. While this type of insurance is often costlier than normal hazard and liability insurance, many agents will not provide this type of insurance for a vacant home that is being renovated.