Despite the “up in the air” status of the economy, it seems like everyone and their grandmother is investing in real estate to take advantage of this seller’s market. Interest rates have hit all-time lows, and housing prices are soaring. Flipping houses or investing in a rental property has become the side-hustle of choice, if not the primary career choice. If you’re looking to get into real estate investing, the stars appear to be aligning.
But what about insurance? What types of insurance should you be aware of before you take the plunge? How familiar do you need to be? What are the differences between the different types of home insurance? There are tons of questions that need answering, and not everyone has the bandwidth to dive into these concepts in their downtime. But don’t panic; Weed Ross is here to put all of these concerns to rest. Partnering with an abundance of insurance carriers has helped us develop a wealth of knowledge, and since we’re a local insurance agency, we’ve got all the time in the world to share the heavy lifting.
In this article, we’ll cover the top four types of insurance for property investors and landlords:
Liability insurance is an essential coverage as a real estate investor, especially if you’re renting out your property to tenants. Having liability coverage protects accidents that happen at the dwelling, whether the accidents involve your tenants, their guests and other visitors, or even repair people. Simply put, if someone gets hurt in a way that winds up involving medical attention, or in a manner that results in a lawsuit, liability insurance offers coverage for it.
Landlord insurance is perhaps the most important coverage to have as a property investor, as it ensures that you are protected from damage, losses, and incidents related to your tenants. Landlord insurance covers several circumstances, but is particularly useful as protection from property damage and rental income loss. Landlord coverages apply to the dwelling itself, any other structures on the property, and even some personal property. Your tenant should have renters insurance that also covers some of these scenarios, but as the investor or property owner, you’ll want protection on your end, too.
Hazard and Fire Insurance
Hazard and fire insurance typically come in your everyday, run-of-the-mill insurance package, but it’s important to note nonetheless. Coverage for hazards and fires provides financial compensation for incidents such as theft, storm damage, fire damage, and more. Many real estate investors play it safe with hazard and fire insurance for their rental properties by insuring the “replacement cost of the property” as opposed to just the “current cash value.” This is to protect themselves in case the value of the dwelling decreases over time.
Loss of Income Insurance
Loss of income insurance, in a way, goes hand-in-hand with hazard and fire coverage, as it provides longer-term protection for you should your rental property become uninhabitable for an extended period. If your rental property experiences a hazard that renders it unlivable for months at a time, you may miss out on a significant chunk of income, depending on your specific circumstance. Loss of income insurance offers compensation to help ensure that you stay afloat in the event that you physically can’t rent out your property.
All of these different types of insurance are certainly worth considering as a real estate investor, and some are absolutely vital. But if you still have questions related to insurance for real estate investments or second homes, talk with insurance experts like us! Here at Weed Ross, we pride ourselves on always being available, friendly, and knowledgeable, so give us a shout.