Making your first real estate investment comes with major financial responsibilities. Are you ready to handle whatever comes next in your journey as an investor?
Though you’ve doubtless already spent a significant amount of money buying your first property, you’ll need to make another major financial decision soon after by choosing the right rental property insurance coverage. Getting the right insurance policy can help protect you against unexpected risks that could cause considerable damage to your finances.
What Is Property Insurance for?
So, what’s property insurance for in the first place? For one thing, it can be a safety net that would help cover the cost of repairing your rental property and its contents in the case of damage or loss. There are many unpredictable events that can cause a headache for your finances when you’re a first-time real estate investor, so here are some of the most common issues that you need to be prepared for:
- You can’t stop natural disasters like cyclones, floods, earthquakes, and bushfires from happening, but you can do what you can to lessen the damage that these can cause to your building. Having property insurance can help lessen the burden of paying for any repairs needed after these unfortunate events.
- Fires and leaks can cause accidental damage, but these would be devastating if they happened to your property. Meanwhile, if you have careless tenants and visitors, they can also inadvertently break or destroy features like plumbing and lighting fixtures. With the right insurance plan, you can cover the expenses associated with fixing your property after these incidents.
- During the off-season, rental homes may become vulnerable to theft and damage. Proper coverage can address any lost or stolen items, as well as the costs associated with restoring the appearance of your property.
- Lastly, if your rental property becomes uninhabitable due to damage or loss, this will prevent you from taking on tenants for a period of time, leading to missed revenues. Some insurance policies, however, can provide you with coverage for a certain amount of lost rental income.
What Should You Consider When You Choose the Right Property Insurance Policy?
Now that you know what property insurance can be useful for and its importance to your investment, it’s finally time to make a decision and select your insurance plan. When you’re doing so, make sure you consider the specific requirements that would suit the needs of your rental property. There are a few particulars you need to look into as you check different policies with different providers:
- What’s the coverage for damages to your building and its contents? Find out what is the appropriate level of cover for both the structure of your property and the items within it. It would be a good idea to hire a professional that can make the proper assessment for you.
- What’s the coverage for any loss of rent? If you can’t rent out your property for a time, then you can’t earn money from it, so make sure that your policy provides adequate cover for any loss in rental income.
- What is your excess or deductible? Make sure you understand the excess or deductible amounts that you will be responsible for paying in the event of a claim as these expenses can add up if you’re not prepared for them.
- What are good add-ons that you can include in your coverage? Don’t just go for the basics or bare minimum, but also consider getting additional coverage options, such as tenant liability insurance or flood coverage, if necessary.
By investing in property insurance, you can protect your financial interests and ensure the long-term profitability of your rental property investment.
Veeramachineni Lalitha
I am Finance Content Writer. I write Personal Finance, banking, investment, and insurance related content for top clients including Kotak Mahindra Bank, Edelweiss, ICICI BANK and IDFC FIRST Bank. My experience details : Linkedin