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Getting Insurance For Your Rental Property - A Tough Game To Win

Apr 13, 2008
Real estate is a great place to put your money and a great way to make money "while you sleep", but it is not without the pitfalls. My wife and I have dealt with a property manager on trial for murder, tenants with knives, fire code inspections going all wrong and so much more. These incidents have definitely been stressful, but finding insurance for some of our properties has been one of the biggest challenges we've faced.

Not buying insurance is just not an option as far as we're concerned. Besides the increased risk that puts on our investments, most of our property investments have been financed by a bank. And, if you go to a lender to finance your rental property, you have to go to an insurance company to get the property insured.

The whole point of insurance, not just real estate insurance, is to get it and never need it. If you make a claim, you have to pay a deductible, and your future premiums will likely go up when you renew or switch carriers. If you don't have insurance, besides the fact that you can't get financing through a bank, should the unlikely catastrophe actually happen you will have a financial disaster as well. Clearly you need to get property insurance. But, just because you need insurance doesn't mean there are companies that will sell it to you.

Insurance is difficult to obtain (and often more costly) if you or your investment property have any of the following "red flags":

* You live more than 100km away from the property

* The property has knob and tube wiring

* The roof is older than 7 years

* You have had a claim on any of your properties

* The property is in poor condition

* The plumbing has not been updated in the past 10 years or so.

If you have any of the above obstacles, you may have to search extensively to find an insurance company to cover you. In addition, you will likely pay a higher premium to be covered. We've dealt with everything on the list over the past few years with difference properties and we managed to get insurance in each case by:

* Fixing the electrical problems that were preventing the insurance companies from insuring it,

* Moving in - living in your property makes it easier to get insurance,

* Insuring our primary residence with the same company - this has the added advantage of lowering your fees and reducing the obstacles to gaining insurance,

* Speak to local landlords and find out who they use for insurance,

* In British Columbia (where we live now), join ROMS (Rental Owners & Managers Society). Members can use their associations and get discounts on insurance, and there seems to be less restrictions on the property condition to get insured, and

* Just keep trying - you will usually find an insurance company that will insure you but it won't be cheap!

Insurance is a game that we have resolved ourselves to play with the idea that winning is getting a good rate on insurance for our properties and then never ever having to use it.
About the Author
Dave, and his wife Julie, have been investing in real estate in Canada for the past eight years, and have built a multi-million dollar portfolio in their spare time with limited cash resources. Today they continue to invest, while sharing their stories and valuable advice in a free monthly newsletter. Sign Up for their free monthly newsletter or view their articles archives at their website www.revnyou.com
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