5 Things To Know About Covering Your Real Estate Assets

Outside a country house looking at a porch with seating

Are you a real estate investor who takes pride in your properties?

If yes, we have extensive experience working with real estate investors just like you!
We completely understand that you are building your real estate investments as a business. You want to be sure if something bad happens that you have enough coverage, as well as the correct coverage to get you back to where you were — to operate and offer nice units and collect solid rents to build a passive income.

Ask yourself the following questions:

1. Do I have enough insurance?

Do you want to carry insurance that can properly restore your building in case of a partial or total loss – at current building costs? Intentionally underinsuring your buildings to save a few bucks is downright very dangerous for the future operations of your realty business and should be corrected as soon as possible. Always insure your buildings for the Estimated Replacement Cost (as determined by professional insurance software) to completely rebuild.

2. Does my policy cover adequate loss of income?

While many Business Owner Policies and some Dwelling Property-3 policies (the most comprehensive dwelling fire coverage policy) may have an endorsement to provide an automatic level of income replacement , we have seen many situations where many do not have any coverage on their policy at all or very low coverage that has not been updated to keep pace with the strong current rent rolls.

3. Are my liability limits adequate to protect my assets against a claim for injuries, etc.?

The premium difference between carrying $300,000 of liability versus $1 million or even $2 million is really just pocket change. Should someone have a large valid claim, you do not want to have to liquidate a property or properties to pay an underinsured liability claim against you.

4. Should I need an umbrella policy?

For the more experienced, robust investors, an umbrella liability policy may very well be needed. This type of policy goes over the underlying property policies and can be an additional $1 million to $10 million or more of liability coverage to protect the entire investor’s asset base, which may also include other investments as well. This policy supplements the underlying policies and does not replace them.

5. Do I have enough life insurance to pay off my real estate mortgages in the event of my death?

While you may be great at running your real estate practice, if you die before you wind down the practice and your spouse is not so keen on being a landlord the properties you worked so hard to find, buy and maintain your real estate holdings could end up being sold at fire sale prices. We have encountered many surviving spouses who have zero interest in continuing the realty business upon their spouse’s death.

Life insurance creates an instant estate and those funds could be used to pay off the mortgage(s) and the properties then could be sold properly and timely at their full market values.