Investing in real estate can be a rewarding way to grow wealth, but it comes with its share of risks—especially when it comes to protecting your property. Whether you’re considering building a brand-new investment property from the ground up or purchasing an existing one, understanding the insurance implications is essential to safeguarding your financial investment.
At Weed Ross, we know that the choice between building and buying directly impacts the type of coverage you’ll need, potential costs, and how you protect yourself from liability. So we thought we’d put together an article that dives into the details.
In this article, we’ll cover:
- Key insurance differences between building and buying an investment property
- Coverage considerations for construction projects
- Essential policies when purchasing an existing property
- How Weed Ross can help you secure the right insurance for your investment
Building an Investment Property: Insurance Considerations
When constructing a new real estate investment property, there are unique risks to consider that aren’t typically part of a standard homeowners or landlord policy. Construction projects involve multiple stages, and each phase presents different insurance needs.
Builder’s Risk Insurance:
Builder’s risk insurance is essential for any construction project. It covers damage to the property during construction, including risks like fire, theft, vandalism, and weather-related incidents. This coverage protects the structure itself and materials stored on-site.
Liability Insurance During Construction:
Construction sites can be dangerous, which makes liability coverage critical. General liability insurance covers bodily injury or property damage claims that could arise from accidents on-site.
Coverage for Subcontractors:
If you’re working with contractors and subcontractors, verify that they have their own insurance policies. If they don’t, you could be held liable for injuries or damage caused by their work.
Additional Considerations:
- Delays in construction can lead to financial losses, so consider coverage that includes project delays.
- If you’re financing the construction, your lender may require proof of builder’s risk insurance before releasing funds.
Buying an Existing Investment Property: Insurance Considerations
Purchasing an already built investment property has its own set of insurance needs. Unlike construction, existing properties can carry risks related to age, condition, and prior use.
Standard Property Insurance:
When buying an investment property, a standard landlord or rental property insurance policy is essential. It covers the structure itself, personal property used to maintain the rental, and liability protection.
Liability Protection:
Liability coverage protects you if a tenant or visitor is injured on the property and decides to pursue legal action. It covers medical bills, legal fees, and potential settlements.
Loss of Rental Income Coverage:
If your property becomes uninhabitable due to a covered event, loss of rental income insurance helps replace the rental revenue you would lose during repairs.
Policy Adjustments Based on Property Age:
Older properties may require specialized coverage, such as:
- Sewer and Drain Backup Insurance: Protects against water damage from backed-up drains.
- Roof and Electrical System Coverage: If the property has an aging roof or wiring, extra coverage might be necessary.
Key Differences Between Building and Buying: Insurance Breakdown
| Aspect | Building a Property | Buying an Existing Property |
| Primary Coverage | Builder’s Risk Insurance | Landlord or Rental Property Insurance |
| Liability Focus | On-site construction liability | Tenant and visitor liability coverage |
| Specialized Needs | Subcontractor and construction delay coverage | Age-related property maintenance coverage |
| Income Protection | Not applicable until completion | Loss of rental income coverage |
How Weed Ross Can Help
At Weed Ross, we specialize in helping property investors across Western New York secure the right insurance solutions, whether you’re building or buying. Our independent agency works with over 40 top-rated carriers, ensuring you get customized coverage that fits your investment strategy. Why else should you choose us?
- Expert Guidance: Our team will walk you through the coverage you need based on your property type.
- Customized Policies: We offer flexible insurance packages for both new builds and existing properties.
- Local Expertise: With offices across Western New York, we understand the unique risks property investors face in this region.
At Weed Ross, we’re here to help you navigate the complexities of real estate insurance and find coverage tailored to your investment goals. Get in touch with us today to get a customized quote and ensure your investment property is protected from day one.
