Investing is the pursuit of building profits. Buying a single-family, duplex, triplex, quadplex, apartment complex, commercial building, or storage facility is a great first step, but what’s next? Insuring the investment properly. Appropriate insurance is simply investing in the investment… protecting it. As with any attempt to build profit, cashflow is critical; however, sacrificing coverage for a better bottom line isn’t the answer. Below are three common mistakes found on investment property insurance policies.
1. A Skeleton Policy
Insuring the main structure is pivotal, but what about the liability coverage? As a landlord, you have many exposures and tenants who will pursue legal actions. What about endorsements you may need? Ordinance & Law coverage is a vital coverage that many policies lack. Is the property insured at replacement cost or actual cash value [where depreciation becomes a major factor]? Is the property protected against only basic perils, or is it protected on a special form basis? Having coverage on the main structure is important, but that skeleton needs some muscle and skin to create a policy that truly protects.
2. Deductible Too Low
A lot of times, investors will have a skeleton policy with a tiny deductible. They often will have higher deductibles for wind and hail damage. Instead of having a low deductible and a basic policy, why not get the policy the investment really needs, and then offset the cost increase by upping the deductible? As an investor it is important to have some cash reserves; this is also known as self-insuring. Self-insure on the small items and save insurance for the major incidents. For every year you don’t file a claim, the lower deductible has cost you more money.
3. Each Property on Its Own Policy
As an investor, billing isn’t where time should be spent. Paperwork should be kept to a minimum. If you have multiple properties, consolidation can lessen the time spent bookkeeping. This master policy often creates significant savings, given the fact that the insurance company also does not have to keep up with several different policies, billing accounts, renewal dates, etc. Consider putting all your properties onto one master policy so that you can do what you are best at doing: investing.
Knowing what coverage(s) you have is important before a claim happens—not after. If you have any questions, we are here to help. Click here to send us a message and talk to one of our specialists or request a quote!