Property owners who seek to earn rental income from their homes and commercial buildings need protection against financial losses resulting from unexpected events. Fire, criminal activity, severe weather and simple slips and falls are but a few of these unexpected and costly events. What follows is a brief summary describing four things every landlord needs to consider before insuring their rental properties.
Landlord Insurance Should Include Liability as Well as Property
Adequate landlord insurance should provide different types of coverage to mitigate different risks. Landlords obviously should choose policies that include coverage for damages resulting from fire, storm, vandalism/theft as well as tenant damage. The ideal policy would include coverage for the replacement costs of the entire structure in the event of a total loss, and it should also include protection against liability claims and lawsuits brought by a tenants, contractors, visitors and trespassers. Thomson Schindle Green Insurance & Financial Services Ltd. of Southern Alberta is one insurer that can provide property owners with the type of risk management solutions called for in the foregoing précis.
Loss of Income Coverage is Available
Some investors are unaware that it is possible to insure an investment property against loss of income. A claim would be payable in the event that a property is deemed uninhabitable because of some other covered loss. This means that fires, storms and other covered casualties won't create a loss of income for the investor.
Budget Time and Money for Administrative and Legal Tasks
Rarely will any income producing property be 100 percent occupied 100 percent of the time. Homes and offices will commonly have tenants for less than 12 full months out of the year. Since it always takes time to find a tenant, landlords should as a matter of policy budget a certain amount of money and time to tend to matters concerning marketing for tenants, drafting rental agreements, eviction proceedings and other legal services.
Expect Rate Decreases From Increased Competition
According to Deloitte Development LLC, a major factor influencing rates for insurance and reinsurance in the commercial property market is an increase in the supply of insurance coverage brought about by the entry of non-traditional sources into the market. Certain capital market players such as hedge funds and pension funds are seeking higher investment returns and are now selling insurance to get them.
Real estate ownership can be a very rewarding investment strategy. It offers opportunities for positive cash flow, capital appreciation and generous tax benefits. The key to realizing these benefits is the mitigation of risk, which is best managed by maintaining adequate levels of insurance.