Insurance: A Forgotten Investment Tool

Real estate investing has reached an all time high. It has proven to be the quickest and most efficient way to achieve the goal of financial freedom. However, there are many pitfalls when it comes to participating in the real estate arena. Many investors lose their life savings, their physical property or have major setbacks because of unforeseen events. To combat these pitfalls, it is wise to add a level of protection in the form of insurance. There are several important types of insurance an investor should consider. Liability, flood, and resident unit manager insurance are a few examples to protect against the unknown. 

Liability insurance protects investors from claims that may arise from injuries or damage to properties while in the investor’s ownership. This insurance covers the cost of legal counsel and payouts if necessary. An injury or negligence complaint can cost a tremendous amount of non-budged expenses, which can lead to an uncompleted project. 

Flood insurance has been overlooked by many new and experienced investors. The false idea that if the region is not flood prone, there is not a need for the insurance. This idea coupled with the intentions of only holding the property a minimum amount of time encourages property owners not to consider this asset. Unfortunately this could be be a major oversight. Flood insurance covers what most liability insurance carriers do not. 

With the flavor of “flipping” so common, many investors overlook property management as a form of real estate investment. Property managers are responsible for the daily operation of properties that are jointly owned. An example of this relationship is home owner associations (HOA). Consumers like the feel of home ownership but do not like the responsibility of maintaining certain upkeep of a home. Therefore, they choose to purchase apartments, condos, or communities that are managed by HOAs. 
Home owner associations has the responsibility of maintaining a safe and highly coordinated community. This helps maintain individual property value as well as ensuring common areas are maintained properly. This includes items such as the community pool and club house. 

Managing multiple units require protection in the form of insurance. It is encouraged that property managers include unit insurance to assist in costly repairs such as an emergency pool liner repair or a repair and update for the main club house. Insurance of this caliber ensure property managers that they are protected. This insurance also covers judiciary fees and representation when there is a legal complaint brought against the community. 

In addition to HOA coverage, the residents in the community must have home owner’s insurance. This insurance is legally required by many states. It is often advised to go a level above the minimum requirement if possible. If there is an injury that occurred on personal property or unplanned costly repairs, home owner liability can offer comfort and take the stress out of these events. 

Investing without insurance is very dangerous. It is suggested to acquire the necessary insurance for your situation. The cost of insurance is far less than making unplanned repairs or settle lawsuits out of pocket. Knowing that if or when a situation arises there is coverage, gives peace and a sense of harmony when tackling investment dreams.

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