Investing in real estate is different than investing in Wall Street stocks. Stocks are speculative, and they’re also a “paper asset.” The stocks might go up and down but there isn’t much that can happen to the “financial instrument” itself (especially since they’re stored electronically instead of as stock certificates now). Real estate on the other hand, when done properly, provides steady cash flow and is a real asset… which means something could happen to your real estate.
The cash flow is nice… but you need to protect the real asset (and yourself). That’s where insurance comes in. Insurance is like a “reset button” to help you recover financially from a loss. If you invest in real estate, maybe you’re wondering, “What insurance should I have for my rental property in Fort Myers?”
Here’s a checklist of insurance that you may need:
Checklist: What Insurance Should I Have For My Rental Property In Fort Myers?
There are many possible insurance products that can benefit you but the primary ones are below. (You may choose to purchase the relevant ones separately or you might want to ask your insurance broker if they have “landlord’s insurance” since some insurance companies will package the right ones together for your convenience.)
Property Insurance.
Property insurance acts as a financial safety net in case your property is damaged by covered events. These events can be natural disasters or other unforeseen circumstances. There’s a variety in property insurance policies, but generally they cover things like fire, lightning, and wind damage.
It’s important to remember that not all perils are covered in basic policies. If you live in an area prone to specific natural disasters, you may need to add an additional rider to your insurance policy. For instance, if your area is flood-prone, you’ll likely need a flood rider on your policy to be covered in case of flooding. These riders can be added for a fee to broaden your coverage and provide peace of mind.
Liability Insurance. If a tenant or visitor injures themselves on your property, they may sue you to help pay for their medical bills and loss of employment income. Liability insurance helps to protect you from the financial burden if a lawsuit goes against you.
Tenant Insurance: Tenant insurance isn’t something you need to get for yourself but we’re mentioning it here because it’s something you should urge your tenants to get. Tenant insurance is insurance for tenants that will cover any financial loss of their belongings.
Here’s How These Insurances Work
In the unfortunate event of a fire, each type of insurance plays a distinct role in protecting you and your tenants. Property insurance, typically held by landlords, acts as a financial safety net for the building itself. If the fire damages the structure, roof, or other permanent features, property insurance kicks in to cover the costs of repairs or even rebuilding. This ensures you, the landlord, aren’t left financially responsible for a major loss.
On the other hand, liability insurance safeguards you from lawsuits arising from the fire. Imagine the fire spreads because of faulty wiring in the building, and your tenant suffers injuries or loses belongings. Liability insurance would cover any legal fees or compensation you’re obligated to pay the tenant if they decide to sue. Finally, the tenant’s own insurance policy, often called renter’s insurance, comes into play to replace their damaged possessions. Their furniture, electronics, and other personal belongings lost in the fire would be covered by the limits set in their renter’s insurance policy. This way, the fire doesn’t cause them financial hardship on top of the emotional distress.
Get The Insurance You Need
There may be other insurance to consider as well, including insurance for your business in case you are injured and unable to work, or there might be other insurance available (such as those through your credit card or bank) to cover bills if there’s a loss of income.
Insurance needs are different for every situation; we’ve covered the 3 basic insurances above to get you started but you should always talk to an insurance professional who can assess your needs based on your individual situation.