Andrew Muller, president of Mappus Insurance Agency, here. I am constantly finding issues when reviewing insurance policies for rental and investment properties of potential clients and prospects. This article is not intended to provide all the answers for properly insuring your investment and rental properties but it should certainly raise some eyebrows and make you dust off your insurance policies. Here are six things to take note of when you are thinking about buying an investment property or reviewing your current insurance policy on an investment property.
- Know Your Policy – I know this sounds elementary, but there are so many people that buy insurance policies and have no idea what they purchased. Many people buy on price and “assume” all policies are the same…far from it. Certainly price is important, but don’t you want to make sure your investment and your hard earned money, will be protected in the event of a claim? Unfortunately, people find out the hard way when it is too late. Don’t let this be you. Understand the insurance company that will be paying the claim’s financials, understand your deductibles (i.e. Do you have a wind/hail deductible or a hurricane deductible?), understand your exclusions (i.e. earthquake, animal liability, mold, water backup – just to name a few). I think you get the point. Honestly, work with an agency you trust and they will help you through this.
- Occupancy Type – Make sure your policy is written as a tenant-occupied home. I see policies written as if the owner lives there (primary residence) versus a tenant way too often. This can cause major issues (to the point of voiding the policy altogether) in the event of a claim. Again, work with an agency you trust.
- Who Owns The Property – I know you are saying “Well, I own the property.” What name is on the title? Is it your personal name, an LLC, maybe a family trust? Make sure the insurance policy is in the correct name. Again, if there is a claim, you could potentially void your coverage and cause many unnecessary headaches. Simply, work with an agency you trust.
- Tenant Insurance – Make sure your tenant has renters insurance. Don’t just ask them to get it and forget about it, make them show you the policy. These policies are cheap, as low as $100 per year. Make sure you have recourse should a claim occur on your property. Keep in mind that most tenant policies only cover property losses when caused by fire, smoke, or explosion. Again, work with an agency that you trust and recommend your tenant to work with that same agency.
- Claims – Understand the claims process before one happens. Understand your deductibles. On the coast of South Carolina, you will have a different deductible for a hurricane than you would if there were a fire. If you carry earthquake coverage, you will have a third deductible. Understand what is excluded from coverage. I often see where many people have more exclusions that coverage because their agent did a poor job putting together their policy. Again, work with an agency you trust.
- Taxes – You might be wondering why an insurance advisor is mentioning taxes? This won’t apply to everyone, but if you are purchasing an investment property for a child or grandchild, you might want to consider putting them on the title. This will allow you to get the primary residency tax versus investment tax – meaning you will cut your property tax in HALF. Yes-half! You will also then have the ability to get more options for your insurance because it is a primary residence and not a rental or non-primary. This can be additional savings as well. Again, work with an agency you trust.
I hope these tips have helped. Should you want to discuss your current investment or rental insurance policy OR if you are thinking about purchasing an investment or rental property, please give Mappus an opportunity to earn your business. We have been a trusted agency in the Charleston and Mount Pleasant area since 1960 specializing in coastal property and flood insurance. Simply fill out the form here or call our office at (843) 763-4200.