The quality of your decision making is going to depend on your knowledge. There are many factors that one needs to consider when placing the right coverage on their home or investment property. The biggest decision is usually the numbers and what a policy will cover. As a sophisticated real estate investor you want to look and see if there are any factors that will reduce the cost of insurance. An insurance may start is by first examining your past history of claims. If it shows that you have a history of no claims or minimal claims you might want to use this as leverage to negotiate a lower premium for yourself. Just like any insurance provider, you can shop around for comparable rates and look at the numbers and terms of different policies to see what fits your needs best. When doing this you want to make sure your comparing apples to apples. It is a good idea to get a minimum of three quotes. Another aspect you want to ask these brokers are about possible discounts available to you. What I have found is if you have a monitored fire alarm system or a security system there might be discounts available to you. Sometimes age can also be a factor so check with your broker. If you are a member at a chamber of commerce, entrepreneurship group or have a job with a union, this is a good place to start looking for savings on insurance. If you’re in the real estate business and want to further protect yourself with liability coverage you might want to look at incorporating, this is a conversation that you can have with you lawyer who specializes in corporate law.
There are many types of coverage out there that one can get on their business, personal or rental property. It is important to understand all the terms associated with insurance, how premiums are determined and how risk is assessed. Knowing the difference in these areas of insurance will not only help you with your decision making abilities but also help you negotiate better terms when you understand how insurance is assessed. I am going to touch on a few of the key terms when one is buying insurance.
- Replacement Cost
This is very important to have in your insurance policy, especially if you have a person property. This type of policy is very important because it covers the content in your person dwelling. The other alternative to “replacement cost” insurance is “cash value”, which means the depreciation of the property value is applied to the damaged property when establishing the values. In this type of policy you might get less money. What you have to do is have replacement cost and then make sure that your amounts of insurance are sufficient to replace your property in today’s value.
- Guaranteed Replacement Cost
This is probably one of the most important types of coverage out there. You can actually qualify for insuring your home to 100 percent of its full replacement value. If you have this in place and something happens, the insurance company will replace the full value of your property, not your personal items though. Make sure this is shown in the policy so you know you are covered.
The deductible can be found on the coverage page of your policy. This is the amount you pay, say $500 or $1000 if you have a claim and the insurance company pays the rest. The cost to investigate and settle a claim can be considerable. This can be out of proportion when the size of the claim is relatively small. These expenses are usually reflected in the premiums you pay. Having deductibles to eliminate smaller claims insurance companies can have their cost of premiums much lower this way.
The key to being successful in any area of real estate involves education first. The same goes for saving money on your property insurance. I highly recommend talking this information discussed and doing further due diligence into property insurance, asking questions and shopping around so you have a better understanding of this complex area of insurance. Your wallet will thank you.
I hope you enjoyed reading today’s blog and found it beneficial. As always, like, comment and share. For more information about some of the real estate results programs we offer visit Team Made Real Estate.
Manjit Rukhra, Your Results Coach to Real Estate and Entrepreneurship Excellence.