An insurance policy for investment property protects the property and any belongings in it. This insurance typically covers hazard damage to buildings such as fire or storm damage. Some policies also cover theft. Most investors choose to purchase a policy that covers the replacement cost of the property. But there are certain factors that you should consider before purchasing an insurance policy.
Insurance for investment property is different from homeowner’s insurance. While homeowner’s insurance will cover your personal belongings, renting out your property comes with unique risks. It is essential to have additional coverage that your homeowner’s insurance policy cannot provide. In addition to liability issues, renting your property also puts you at risk of liability issues involving the tenants and any guests staying at your property.
The insurance cost for investment property will depend on the number of units, the type of building, and its location. It can cost anywhere from $1,500 to $5,000 per year. Because investment property is supposed to be a money-making vehicle, you want to protect it as much as possible. A good insurance agent can help you navigate the complexities of investment property insurance.
You can reduce the cost of insurance by raising the deductibles on your policy. It is advisable to set a deductible that is not greater than the standard liability amount of the base policy. You can also list your property insurance on an umbrella policy. Make sure your agent inputs all the important details of the property. You must also remember that your insurance for investment property should cover damage to the building, including carpets and AC units.
Life insurance is also crucial for property investors. It pays out a benefit if the policy owner dies. It is not enough to replace your income, but it will give you some financial breathing room. Life insurance is not necessary for everyone, however; single people and couples without children do not usually require it.
If you want to have coverage for your investment property, you need to consider two key types of coverage: liability and loss of use/rents. These are the two most important forms of insurance for investors. The former is the least expensive in terms of dollar amounts, and the latter provides more coverage. In addition, liability coverage is not very expensive compared to other forms of insurance. For example, an increase in the liability coverage to $500,000 would result in a premium increase of less than seventy dollars per year.
Unlike home owners insurance, legal expenses insurance for investment property doesn’t cover the legal expenses you incur in disputes with tenants or housing companies. Your property may also be damaged intentionally by tenants. Landlord insurance can also cover the costs of lost rental income. This coverage is usually tax-deductible.