ReCasa Financial Blog
Below is a helpful piece written by our guest blogger, Patrick Nelson of Dennis & Nelson Insurance, regarding important types of insurance that all successful real estate investors should consider.
Insurance Essentials for Real Estate Investors
By: Patrick Nelson of Dennis & Nelson Insurance
Investors in real estate have some unique exposures that need to be specifically addressed with insurance policies tailored for your situation. Whether you intend to rent them out, or flip them, here are some essential insurance coverages you should consider:
General Liability – A commercial general liability policy can cover all the various things you do. Whether it is premises liability for the properties you own, construction activities at properties you are rehabbing, or activities (and liabilities) you take on when leasing/renting properties. Make sure you talk to your agent about everything you do in conjunction with your business.
Dwelling Insurance – You need to cover the properties themselves. Keep in mind that a homeowners insurance policy typically includes coverage for other structures (detached garages, sheds etc) and personal property (stoves, refrigerators, furniture etc) but a dwelling policy typically does NOT include coverage automatically. If any of your properties have detached structures, they most likely will need to be listed (and valued) on the policy separately. If you have any furnished properties or provide appliances, you’ll also need to separately list an amount for those as well. Built-ins, furnaces and such are usually considered a part of the dwelling, but it’s worth asking to make sure. Also, make sure you understand whether your dwelling policy values your property at cash value or replacement cost. It makes a big difference, so be sure to understand what you are buying.
Builder’s Risk – If you take on rehabbing projects yourself, then you’ll want to have a builder’s risk policy in place. This will protect any construction materials you have on premises. Since they are not yet part of the dwelling and they don’t fall under the definition of “contents” you’ll need a separate policy for that.
Life Insurance – The name of the game in real estate is leverage. You probably have loans on many of your properties, and you are experienced at juggling your capital needs to make the most of your opportunities. Your spouse, heirs or court appointed executors may not have the experience required to keep all those balls in the air, however. Having a life insurance policy in place to cover the loans on your assets will make settling your affairs much easier.
Also, if you own properties with a partner or as part of a corporate structure, it might not be in the best interest of your business partners to have to liquidate properties in order to compensate your heirs. A properly structured life insurance policy can solve that problem.
Some other coverages you should or may want to consider:
Ordinance or Law – If your community has strict building codes, you will want to make sure your dwelling policy provides this coverage. In some communities, partial damage to a home can cause it to have to be brought to 100% of the building codes. This can add thousands of dollars to a project and even mean having to tear out things that are perfectly fine, in order to bring them up to code.
Directors & Officers – If you have a sophisticated corporate structure and have a “Board of Directors”, you should consider purchasing a policy to protect your Board from lawsuits with a “D&O” policy.
Umbrella Coverage / Excess Liability – If you have extensive assets to protect you may want to consider buying umbrella insurance. The standard commercial general liability policy usually provides $1 million of coverage. Sometimes this can be increased to $2 million or more. An Umbrella policy can provide an extra level of protection on top of your commercial liability policy. Common amounts are $1, $2, and $5 million and amounts over that can be negotiated if needed.
Insuring a real estate investor can be tricky and you need an insurance agency that has experience working with real estate investors. Dennis & Nelson Insurance Group has extensive experience working with real estate investors. Call us today at 740-982-3091, 740-450-0200 or 614-222-0911 to schedule an appointment.
Dennis & Nelson Insurance Group is independent and represent numerous insurance companies including Erie, Western Reserve, Progressive, and many more.
They offer a complete line of insurance products including personal auto, home, umbrella, SR-22 Bonds, Farm, Identity Theft, Flood and Renters, Commercial auto, property, umbrella, Bonding, Workers Compensation, General Liability and medical malpractice. They also offer health insurance (individual & group), employee voluntary benefits, Medicare Supplemental, Disability, Long-Term Care, Term and Whole Life, Annuities, Financial Services, and IRAs.
Dennis & Nelson Insurance Group also offers insurance to the transportation / trucking industry. We are truck insurance experts and offer Commercial / Business Auto, Liability, Physical Damage, Cargo and General Liability. We insure trucking companies and their employed drivers and owned trucks and trailers and we also insure independent truckers. We insure box trucks, semi trucks, flatbed trucks, front loaders, garbage trucks, pickup trucks, tank trucks, tractors, dump trucks, auto hauler trailers, flatbed trailers and many more.
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