It’s easy to make mistakes as a real estate investor or a landlord, and sometimes those mistakes can be quite costly. Today, we’re talking with Mark Roland, who is a commercial agent with Foursquare Insurance Agency. We are discussing insurance as it pertains to rental properties, and how you can be sure you aren’t setting yourself up for financial disaster by making these mistakes.
Include Loss of Rent Coverage in Your Policy
The biggest mistake investors make is not including loss of rents coverage when they’re writing their original policy. If the house blows away in a tornado or burns down in a fire, you won’t have any income while it’s being rebuilt.
Your loss of rent coverage will replace that income for you. So as an investor, you still have your cash flow coming in, and you’re still making a profit.
Keep Your General Liability Coverage
Sometimes landlords will try to cut corners, and they will reduce or even remove their general liability coverage. This is a mistake. If something happens at the property to the tenant or a guest of the tenant, your liability coverage protects you from a lawsuit.
It’s also pretty inexpensive. You get a lot of protection for about $100 or $120 per single family home. If you’re trying to save money, general liability coverage is not the place to do it.
Attach the Proper Value to Your Home
On the property itself, people often want to put the lowest value possible on the house. Or, they’ll use whatever figure is on the tax roll. But, if the house does burn down or blow away, the insurance company is only going to rebuild up to that portion that’s covered. You don’t want to rebuild half a house; you want your whole house back.
Make sure you have enough coverage for the rebuild. It costs more to build a house today; there’s a shortage of general contractors and the building process is more expensive. You need the right value on your home so you can be fully covered if you need to rebuild.
These are the most common errors we see. If you have any questions or need any help avoiding these mistakes, please contact us at PMI McCaw.