There are several types of investment property insurance that are important to south Florida real estate investors, and we’ve asked an insurance expert to join us. Jorge Acosta, with USI Insurance, is going to explain what types of landlord insurance shouldn’t be overlooked when you’re managing the risks associated with your rental property.
Quite a few insurance coverages are a necessity for investors and landlords. Property insurance is number one, and it covers things like fire or theft. You also need tornado and wind coverage on your properties. Sometimes, owners don’t think about including that coverage because the house may be paid off or the bank doesn’t require it, but it’s necessary.
Liability insurance is also very important. Take a look at your policy and make sure you’re adequately covered. Tenants tend to have people come in and out of the property, as everybody does, and if someone slips and falls at a party, they can sue you. Be protected with liability insurance so the policy covers you for those types of damages.
Loss of Use Insurance
One of the most important policies to keep in mind is loss of use and loss of income. Whenever a storm hits or a fire occurs and the tenants won’t be able to live in your property, you won’t have rental income. Loss of use insurance will ensure you don’t lose that income, whether it takes three weeks or six months to get your tenants back in place.
Flood insurance is extremely important and not too expensive, even in a flood area. People forget that 30 percent of the time, floods occur in non-flood areas. So make sure part of your risk management plan is to include flood insurance.
Those four types of insurance are the most important policies a real estate investor can buy.
Deductibles and Co-Insurance
Choosing the right deductible amount is strictly an economic question for the property owner. The higher the deductible, the lower the cost of your premium. It’s important to get a good deductible that you can cover. You don’t want to pay 10 percent if something happens, you want to pay 2 or 3 percent. Sometimes we hear about people wanting a $50,000 deductible, but at that point, you’re basically self-insuring. I recommend $2,500 or $5,000 for your deductible amount. It depends on your risk tolerance and what’s best for you and your properties.
Choosing Your Insurance Company
There are hundreds, even thousands of insurance companies out there. Some of them will offer very low prices, however you want to think about whether that means you will have to fight to get your claims paid. Typically, I won’t sell or recommend any company that isn’t A-rated by A.M. Best. Financially, they have to be sound, they need the right amount of reserves to pay claims, and they need a strategy if there’s a catastrophe.
Comprehensive Risk Management
Those coverages we talked about are pretty general and most owners will know to have them. But to have a comprehensive risk management plan and make sure you’re covered correctly, look at two other things. One is cyber liability. Owners have data on all their tenants and even the people who applied but didn’t get approved. So a breach can be costly to you. If someone steals the identity of a tenant or takes money out of a bank account, you could be in trouble. Get cyber liability, which will protect you. Another thing to consider is an environmental policy. Most property policies don’t cover this, and you need separate coverage. An environmental policy protects you against things such as oil that a tenant might leak. If your tenant throws oil away in a dumpster and that leaks into the water supply, it’s going to be a big issue. This insurance will cover liability claims and environmental claims.
We are appreciative to Jorge for sharing this information with us. If you have any questions about investment property insurance in south Florida, or anything pertaining to Fort Lauderdale property management, please contact us at Florida Property Management Services.