The best time to shop for insurance is before you sign a contract to buy a piece of property. A good insurance agent can give you valuable advice regarding the best types of properties that will minimize your insurance expenses. An insurance company prefers properties that are fairly "bullet proof." It offers the best rates for those types of property. Use your insurance agent as an advisor. The annual insurance premiums on a property can make or break a deal. Learn about the premiums before you become obligated under a purchase contract.
For any property you have under consideration, require the seller to provide you with a C.L.U.E. report, which is the insurance claims report for the property for the past five years. If there has been water damage, you might have black mold issues. A fire could indicate structural concerns. You may also discover that the current owner has renewed the insurance for years, but a new owner might not be able to obtain insurance on that property for various reasons. An insurance agent can review the report and advise you.
The best kind of general property insurance policy is called an allrisks policy or a comprehensive policy. It covers every disaster and damage except those specifically excluded by the policy. Cheaper policies might have a long list of things that are covered, but if anything else happens, you have no insurance coverage.
Be sure to obtain policy limits high enough to replace your property if it is totally destroyed. You can increase those limits each year as your property increases in value, or you can obtain coverage that automatically increases according to inflation. The automatic increases are nice because you do not have to think about them, but they will not give you enough protection if your property is increasing in value more rapidly than general inflation.
Flood insurance is available from the federal government. Lenders require it for any property that has a 1% likelihood of flooding in any given year. This is popularly known as "being in the 100-year flood plain." Even if not required, property owners might want to consider obtaining flood insurance anyway. The premium is usually around US Dollars 500 per year for the average home or other small property.
According to the Federal Emergency Management Agency (FEMA), 25% of flood claims are for properties in low- to moderate-risk areas. You can obtain more information by visiting the website of the National Flood Insurance Program. Specialized landlord insurance protects your property and provides additional coverage for loss of income during un-rentable periods or sometimes during disputes with tenants. In the alternative, you might need a general business liability policy (GBL). Make sure you are covered against claims for personal injuries, defamation, wrongful eviction, conversion (claims that you took a tenant's personal property), mental distress, and violation of fair housing laws.You might also want to think about riders for employee dishonesty and for off-premises use of vehicles by an employee.
If you have employees, such as your own property manager or maintenance person, your state may require workers' compensation insurance. Having workers' compensation insurance results in employee work-related medical bills and personal injury claims being paid, even if your employee was at fault for his or her own injuries. This might not seem fair, but the tradeoff is that you are protected against lawsuits, even if the injury was clearly your fault. The employee is not allowed to sue you for his or her injuries or losses. He or she is limited to the workers' compensation coverage, or can argue with and sue the workers' compensation company.
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1. Things to Know Before Selecting an Apartment
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