The Rental Property Insurance You Need

Oct 1, 2011 by Rental Property    6 Comments    Posted under: Rental property insurance

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After years of accumulating resources, every investment property owner needs to be concerned about protecting her assets through insurance and risk management programs. After working and sacrificing to build your wealth through real estate, don’t be careless and lose it. Rental property insurance is something you will require when you buy rental property.

The concept of risk management includes much more than simply having a rental property insurance policy. You need to take care to practice proper maintenance and recordkeeping and require that others provide you with coverage for their activities. That’s what this chapter is all about.

As the owner of investment real estate, insurance coverage is one of your best protections and an essential risk management technique to ensure that you hold on to the wealth that you create.

rental-property-insurance

f you’ve ever sat down with a sharp and assertive insurance agent, you may know that some insurance companies sell you coverage against any possible danger or loss in the world. Experienced insurance agents seem to have mas- tered the art of describing all sorts of horrible problems that may befall your investment property. But you need to sift through the sales pitch, do further research, and decide which coverage is right for you — and make sure you’re covered at a reasonable cost.

Your goal is to pay only for coverage for events and losses that can occur at your property. The right insurance coverage is worth a lot, but use resources wisely — hurricane insurance in Minnesota isn’t worthy of your precious insurance dollars.

You need to be concerned about lawsuits and having the proper insurance coverage to defend yourself and protect your assets. Insurance not only provides protection against actual losses but also provides a legal defense against the claims made against you as the owner of real estate. The expense of retaining competent legal counsel is what makes the threat of a lawsuit so devastating to many real estate investors.

Don’t assume that all potential losses are covered by your insurance cover- age. Your best defense against losses is to properly manage your rentals and assertively eliminate, transfer, or control the inherent risks of owning and managing rental property.

 Selecting Potential Rental Property Insurers

The coverage you can get as a rental property owner varies among insurers, with some firms specializing in real estate. Be sure to interview and select a qualified insurance broker or agent who understands your unique needs. The insurance professional can then provide you with information on the kinds of coverage worth considering. Insurance professionals are either independent brokers or exclusive agents who just write policies for one company.

As with any competitive product or service, speak with multiple indepen- dent insurance brokers and a couple of exclusive company agents to ensure that you receive the best value on desired insurance coverage. Keep in mind that the lowest premium is often not the best policy or value for your specific needs.

In addition to the price of a policy and the insurer’s reputation and track record for paying claims, an insurer’s financial health is an important consid- eration when you choose a company. Insurers can go belly up. Major rating agencies that research and evaluate the financial health of insurance com- panies include A. M. Best, Moody’s, Standard & Poor’s, Duff & Phelps, and Weiss. Each rating agency uses a different letter-grade system. Some com- panies use AAA as their highest rating, and then AA, A, BBB, BB, and so on. Others use A, A–, B+, B, B–, and so on.

During the financial crisis of 2008, as well as during other times, you may have heard about some insurers getting into trouble despite prior high ratings. That happens, but don’t worry about an insurer going belly up and not paying claims. Insurers are regulated and overseen at the state (and federal) level and troubled insurers are merged into stronger ones.

Just as it’s a good idea to get more than one medical opinion, two or three financial ratings can give you a better sense of the safety of an insurance company. Stick with companies that are in the top two — or, at worst, three — levels on the different rating scales. You can obtain current rating information about insurance companies by asking your agent for a listing of the current ratings.

After you’ve made your decision as to which policies and insurers you want to do business with, be sure that you pay the premium, and insist on evi- dence that the insurance company has provided coverage. Typically, you receive a written binder as soon as you have coverage; however, your best proof of coverage is a formal certificate of insurance. The certificate of insur- ance is essential — prudent real estate owners never rely on verbal represen- tations that they’re covered.

Rental Property Insurance Providers:

1. Zurich
2. State Farm
3. All State – Landlord Insurance
4. Met Life – Landlord Insurance
5. Foremost – Rental Property Insurance
6. Safeco – Landlord Protection Insurance

Rental Property Insurance Quote Comparison:

1. USInsurance – Rental Property Insurance Comparison
2. LandLord Insurance – Comparison

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