When buying an investment property, many things are considered, such as cost, maintenance, and location. But what about the right insurance?
Investment property insurance, or landlord insurance, can protect you from the many problems you encounter and from the issues unique to an investment property. Your investment can either be as a rental or for resale (“fix and flip”), and this exposes it to different coverage.
The type of insurance that covers for rental properties:
There is the landlord insurance policy. This typically includes building insurance, and it is for any damages that can happen to structures such as garages, fences and swimming pools. Also, it has the general liability coverage for injuries and accidents which may occur on the premise.
Vital to landlord policy is malicious damage cover. This will cover you in the case that your property is vandalized and deliberately trashed. It is important to get malicious cover damage that also INCLUDES anyone that occupies the premise, since there is a chance your tenants or their guests might be responsible for the damage.
Another important feature to have is rental default insurance. In the event there is damage to your rental property that makes it uninhabitable, any loss of rent you would incur would be paid to you by the insurance coverage. This lasts for a specified date or the length of time it takes to make the premise habitable again.
Coverage for legal fees from tenant suits should be included in your Landlord policy. This liability coverage is especially crafted to help cover the cost of any litigation against you as a landlord from tenants or their guests.
The type of insurance for resale investment properties (“Fix and Flip”)
This type of insurance is unique to remodeled homes which are planned to be sold in the near future. Since there is not much items or personal belongings, the coverage is minimal for personal damage. There are insurance products called “Vacant home Insurance” which caters specifically for this type of property and covers the bare essentials in the case of damage or theft.
What is important is to get coverage that protects you while the remodelling work is being done, as well as coverage that protects the structure itself while it is in your hands. Also, any policy should include the value of the new materials used even though you insured it before the remodeling took place. Keep updating your insurance agent if you replaced new flooring or added more square footage to the property.
It is important to have your property be worked on with a licensed contractor for insuring fixer properties. You don’t want the insurance to have a reason to deny coverage in the case of any loss you incur.
Once you sell the property, these type of insurance policies have an easy cancellation feature. This will allow you to move on to the next project.