Insurance is a topic that is often overlooked by real estate investors and landlords, even though it is a vital part of every successful property investing career. In the event of a partial property loss, a total property loss, or even a liability lawsuit, if you are not properly insured, you could find yourself financially devastated, your real estate investing career in jeopardy, or worse yet, your life savings wiped out and a large judgment against you.
With the proper insurance in place, you can hedge yourself against large losses that could wreak financial havoc. It is important to realize, however, that you must find a proper balance between being insurance rich and cash poor. You want to make sure that the amount you pay in insurance premiums alone does not place a financial hardship on you and your business. If you find yourself in a financial hardship due to insurance costs, it may be time to rethink your investment.
It is also important to note that you should always speak with a professional insurance agent to discuss your particular situation and needs. Every property is different. A property in a coastal area has different insurance requirements than one surrounded by farm land. Under-insuring an investment property, over-insuring an investment property or having the wrong types of insurance on the investment property can all produce disastrous results.
Types of Insurance for Real Estate Investors and Landlords: