FINANCIAL FREEDOM FRIDAY$ 18 
INSURANCE FOR RENTAL HOUSING PROVIDERS
Does the fear of a tenant trashing your place prevent you from investing in real estate? Do you find your home insurance policy inadequate for a rental property? And what about those dreaded water issues that can cause up to 59% of claims on rental properties?
All of us who are active Rental Housing Providers believe in Warren Buffett’s rules, and want to protect our real estate assets. For anyone new to real estate investing, here’s a short description of your ideal specific insurance policy.
• Guaranteed Replacement Cost Protection: this type of policy ensures that the owner(s) receive all of the money required to rebuild your home, for example, after a fire. This means the “real” value of your investment property is protected. (This one keeps Warren Buffet happy!)
• Rental Income Protection: What if there is serious water damage, and the tenants have to move out, and remediation takes 6 months or more? Ok, this doesn’t happen often, but if it did, we don’t want to be stuck with extra mortgage payments and no rental income. Different policies cover fire, flood or earthquake damage differently, but the concept is that your policy would COVER and reimburse YOU for the rental income you should have received; and some policies provide this coverage for up to 24 months. (This one keeps the bank happy and lets you sleep at night! Mortgage payments can easily continue).
• Vacancy Protection: What if I can’t find a tenant for a few months and something happens to the property while it is vacant? If you’ve ever owned rental property through the winter, you know it can be difficult to find tenants. If a pipe bursts during this time, it may be a day or two before a neighbor is able to alert you to the issue. And the damage that can occur is astonishing. Most traditional residential insurance policies limit the amount of time that your house can be vacant—go over this limit, and any damage is not covered. Vacancy protection for rental housing providers recognizes that it can take a month or two to find a new tenant—it’s well worth checking out your coverage. Some policies allow up to 120 days of vacancy in an investment property!
• And the dreaded Vandalism by Tenants: We’ve all heard at least one horror story. As a smart real estate investor, you’ll do everything in your power to rent to the best quality tenants! But the con artists are out there, and some manage to sneak through even the most diligent tenant screening process. It’s simply best practice to have an insurance policy that protects you in case of emergencies. Some policies will cover up to $50,000 of tenant damage. However, we find it reassuring that tenant vandalism accounts for only 5% (approximately) of overall insurance claims—based on recent trends.
Insurance coverage for residential properties and investment properties have some similar coverage items as well, for example Comprehensive General Liability coverage.
One of the advantages of investing in real estate is that you CAN insure your investment. In contrast, your stockbroker might laugh at you if you asked for insurance on the latest stock pic. So let’s listen to the wisdom of Warren Buffett, and protect your investment property wisely.
To get you started, you can ask for quotes from Park Insurance, especially if you are a REIN member, or HUB Insurance. And sleep well, ….
