Manage Your Risk with the Proper Real Estate Insurance Policy

April 9, 2009 by  
Filed under Real Estate Investing

Although there has been a recent downturn in the economy and thus the housing market, there is still something to be said about maintaining the proper insurance policy to protect your wealth and safety. The market will resume appreciating in some manner of time, and your real estate investments probably represent a large part of your hard-earned wealth and money. Increased value of items always means you are at bigger risk of losing, so it’s a good idea to reevaluate your insurance policy every year.

Title insurance and liability insurance have nothing to do with the state of the current market, and are the most important forms of insurance for an investor to maintain. When purchasing a property, title insurance will cover any unforeseen liens or obligations which arise between the agreement to purchase and closing on the mortgage loan. This prevents you from being responsible for the $2000 water heater that was installed but never paid for last year!

Although title search companies are very thorough and present a valued service, human error or technical issues of public record can always become an issue. Title insurance is vital to ensure the title does not carry any added financial liabilities once you take ownership of the property.

Liability insurance coverage is important for any real estate owner to invest in; this type of policy protects against legal claims arising from injuries or other mishaps that may occur while on your property. Believe it or not, even if an uninvited guest slips and falls on your sidewalk or is bitten by your dog, they can still press charges against you as the property owner.

This type of insurance will pay for medical bills resulting from the injury and financial settlements. There are also different levels of damages covered, as well as varying definitions of the type of event that’s covered. This may cause you to pursue an added umbrella liability insurance to cover any differences between the limits of your homeowner’s policy and your susceptible wealth.

Liability is also important for the real estate investor who is renting properties and acts as a landlord. If a tenant slips and falls in the bathroom after spilling water everywhere, you may also be held liable; so, consult a real estate attorney and ensure you’re covered for all of these ‘what-ifs’!

Other types of insurance may or may not be required by your home mortgage loan company, but may be worth considering on your own accord. Hazard policies cover earthquakes, tornadoes, hurricanes, fire, wind and freezing structures. These may also be referred to as ‘natural disaster’ policies by your insurance agent.

Events which can damage your home that are caused by man may also be covered. If your tenant burns down your home after lighting a candle and leaving it unattended, you can choose coverage for this. Chemical spills, faulty plumbing or electrical wiring, theft and vandalism may also be included in your individualized real estate insurance policy.

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