4 Coverage options every Real Estate Investor should have!

1. Higher Liability and Excess Liability- let's be honest here, we live in a highly litigious world. The cost of goods and services is at or near an all-time high, so the exposure to a possible large liability loss is as well. Why is it important to have higher liability limits? In most cases, your liability coverage on a landlord protector policy( also known as a Dwelling Fire Policy) is capped at $500,000 per loss, and in my experience, most of my investor clients have come to me only having $300,000 in coverage. An Umbrella policy can provide an excess limit of liability coverage starting at a $1 million limit, so depending on your exposure of assets you could be open to a large financial loss. Umbrella policies can be as low as around $300/yr.

2. Loss of Rents/Loss of Use- What happens if you have a claim and your tenant(s) can not reside at the property until repairs are completed? Who pays for that lost income? Yes, Loss of Rents is critical coverage to ensure your financial commitment to a loan or operating budget is maintained. The most common mistake I see on this coverage is that the coverage limit is not aligned with your rental cost per unit. Speak with your agent to make sure that your rental income is aligned with the Loss of Rent coverage.

3. Sewer and Drain- The backup or failure of a sewer, drain, and/or sump pump is a major inconvenience not only to your tenant but to you as an investor. The average claim amount in the Fargo-Moorhead area is $7000 for Bi-Levels and $11,000 for Ramblers. The damage sustained is heavily weighted on how quickly the loss is noticed and the amount of water the property is inundated with. Do all the real estate investors "need" this coverage? No, but every property is different, so I recommend evaluating this coverage on a per property basis.

4. Special Form- What the heck is Special Form? On Dwelling fire policies( or Landlord Protector) there are three types of coverage forms ( what is covered and how is it covered) Basic, Broad, and Special. In another context, think of it as a good, better, best comparison. Special Form provides coverage for more situations and generally at a replacement cost level( some items require an additional endorsement). "What should I consider to determine if or why I should have Special Form coverage?" The first thing to consider is the condition of the property. The condition of your property may prevent you from having anything but the basic form of coverage. The second is market value. You may have acquired the property for say $75,000 but to rebuild the dwelling would cost $230,000. How risk-averse are you? Do you want to protect your cash in or the real value of the location and property itself? Third, having the best coverage to provide peace of mind. Just knowing that your investments are protected at a replacement cost or repair cost level can leave you and your tenants happy.

Do you utilize a property manager for your properties? Did you know that you should be getting a discount on your policy for doing so? Take the insurance test to see how you rate!

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