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How to Insure an Investment Property

June 15, 2011

investment propertyIf you’re fortunate enough to have an investment property, you want to make sure you’re protected against financial loss. That means carrying adequate insurance. Following are a few tips on how to insure an investment property.

Special Policy

The first thing you should be aware of is that your regular homeowner’s policy may not cover an investment property. You need to take out a special policy aimed at protecting the investment property. These policies are specifically designed to cover a rental property, and the problems associated with them. You need to understand the differences. Because an investment property is separate from the home you dwell in, your homeowner’s policy will probably not cover it–or at least it won’t fully cover it. An investment property usually requires business owner’s insurance coverage. If so, a business insurance policy is required. Check with your insurance agent, accountant, or attorney to find out for sure. If it requires separate coverage, you need to find a qualified business insurance broker to help you acquire the type and amount of coverage you need.

Interior Coverage

You need to be covered for any eventuality, if possible. Although that’s tough to do, there are some rudimentary decisions to be made. You need to not only have protection against possible damage to the exterior of the building, but to the interior, as well, particularly if you own the furniture and appliances. Frequently, renters aren’t overly careful about how they treat the couch and chairs if they don’t own them. Sure, you charge a security deposit, but how far will that go if a renter abuses virtually everything, then skips out without paying the rent, and doesn’t leave a forwarding address. You’ll be stuck with the repairs, which could add up quickly. As a result it would be a good idea to carry adequate coverage on the furniture, appliances, and the structural integrity of the building. Unless you’re a whiz at home repair, and have a lot of free time on your hands, you will probably also need language written into your policy that will pay for replacement of appliances, as well as the labor costs associated with installing them.

Exterior Coverage

Although potential damage to the interior of an investment may come from a renter, exterior damage is likely to come from a storm or some other form of natural disaster. In order to protect yourself against the ravages of hail, wind, or a rogue meteorite, you need to carry adequate coverage on the exterior of your rental property. You will need to discuss the extent of coverage with your insurance agent. They will be well versed in the type of protection someone in your circumstances will need.

Liability Insurance

In the event you have to hire professionals to repair damage to your investment property, you want to make sure you’re protected if someone gets hurt while doing so. Carrying liability insurance may be the best way to provide that protection. In today’s litigious society you can never tell who may be prone to filing a lawsuit over something you may consider frivolous. Make sure your liability policy covers anyone who may be injured while on the property, not just workmen.

Finding the Right Coverage

After determining exactly what type and the amount of insurance you’ll need for your investment property, you’ll have to find the right agency to provide coverage. You can begin your search online by getting some business insurance quotes for comparison. It’s a relatively easy way to search for the right coverage, because you can do it from the privacy and convenience of your own home. Provide the online websites with the information you ask for, and take note of the price you’re quoted. You may then want to call a few traditional insurance agencies and get their prices for comparison. Carefully consider the costs and decide on the agency you feel will provide you with the best service at reasonable rates.

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