What Kind of Insurance do you need as a Real Estate Investor and other Insurance Help to protect your real estate investment
As a real estate investor, you have specialized needs when it comes to insuring investment properties. You may have multiple properties, some of which may be vacant. And those properties may be titled in the name of an individual, an LLC, a corporation, or a land trust. Insurance for real estate investors is different than insurance for home owners. You may have questions about which type of policy to buy, and what it covers.
L & M Insurance Group has extensive experience helping real estate investors with their unique insurance needs. On March 3, L & M’s president, Mark Holley, along with colleague Larry Johnson, made a presentation to the general meeting of the Suncoast Real Estate Investors Association (SREIA) covering several points of interest to real estate investors. Here is some key information from the presentation:
DP3 vs. DP1 policies
The DP3 and DP1 policies are two types of tenant-occupied policies that real estate investors should consider. Typically, the DP1 form only covers named perils that are listed on the policy, including fire, smoke, wind, hail, lightning, explosion, and so on. DP3 policies cover all perils except those that are specifically excluded in the policy documents. Basically, the DP3 form is for property owners who want a tenant-occupied policy with all the bells and whistles. If you need to save money, or are interested in assuming more risk yourself, choose the DP1 form. Be sure to talk to your agent about what is included and what isn’t, so you can get the policy you need.
Builder’s risk vs. vacant dwelling
Builder’s risk provides insurance coverage for either residential or commercial buildings under construction or renovation. Vacant dwelling covers a dwelling that is unoccupied.
One thing to remember is that the liability coverage included on a builder’s risk policy doesn’t cover exposure to claims related to renovation, so the people you hire should carry general liability and list you on their policy as an additional insured.
4 point inspections and wind mitigation reports
If you own a home or rental property older than 30-40 years, a homeowners company may require a 4 point inspection before they’ll sell you a policy. A 4 point inspection looks at the four main systems of the property: the roof, the plumbing system, the HVAC system, and the electrical system. These inspections generally cost between $75-$100, and are good for three years. If the inspection reveals something unacceptable to the underwriting rules of the insurance company, they may decline to cover you. You may then choose to fix the problem(s), or try another insurance company. Your independent L & M Insurance Group agent can help you determine which company will be most likely to cover your property.
Even if the insurance company will write the policy, certain things will cause premiums to be higher, including aluminum wiring, an old or patched roof, and plumbing or heating/cooling systems that have not been kept updated.
Wind mitigation reports tell us about your roof, and what credits can be applied to your policy. The inspector will examine and report on your roof’s covering, roof deck and roof wall attachment, roof geometry (hip, flat, or other), secondary water resistance, and opening protection.
In addition to certain physical features that cause your premiums to be higher, certain situations may also increase the cost of your insurance. These include lapses in coverage, short-term rentals, and property being held in a land trust or a land trust with multiple entities.
Our partnership with you
L & M Insurance Group’s goal is to write your real estate investment insurance policy for the best price with a company that will pay your claim if you have one. That’s one of the reasons we need full and accurate information about your properties when we’re quoting your policy. You can help us by answering our questions truthfully and fully. We have markets that will write almost any kind of situation, but we need to know certain details in order to place your policy with a company that is right for you.
Have questions? Please give us a call at 813-672-4100, and let L & M Insurance Group help you protect your real estate investments.
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