2021-08-08

Types of Insurance for Real Estate Investors

Useful Types Of Insurance That Every Wise Real Estate Investor Should Know And Apply

When you’re running a rental business, insurance (I.) is something that landlords sometimes save on. While it is true that I. event may never happen to you, it is also the truth that if something big-and-bad happens, it may lead to the entire loss of your business. A simple example is a wildfire, which eats up cities and buildings (and these events start being more commonplace year by year since nobody’s canceling climate changes or dealing with their triggers). Imagine that a fire or a tornado destroyed your entire commercial property so you only have a foundation left. If you don’t have money to rebuild everything from the ground, your business is lost and, in most cases, you’re broke.

What is real estate insurance?

To prevent such bad occasions from ruining your property, business, and life, insurance has been invented as a tool. It is broadly used in the US and other countries, where risks of damages are high. Damages may not be only caused by natural or man-made disasters: they also include coverage of risks of vacancy, cyber liability, legal risks, I. of commercial vehicles, advertising, property damage due to actions of tenants, and more.

Having types of I. coverage that you need will help you be covered should anything occur and not to pay too much money for the coverage of risks that you don’t need. For instance, that could be cybersecurity liability coverage, which protects you from damages due to data breaches and leakage but if you don’t have such data or do not keep important data online, you shan’t gain this type of I.

Below, we’re considering the most important options for insurance.

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Real estate investor insurance types

  1. The most important one and that you should always have at all times is fire and hazard I. Hazard I. is the one that covers the risk of damage and full destruction of your property due to fire (man-made or wildfire), lightning, hail, snow, wind, rainstorm, flood, tornado, tsunami, sleet, or other events of nature. Man-made fire I. is a must – you’d be frightened if found out the statistics of man-made fires annually in the US. As the numbers tell, catastrophic fire damages are not just ‘more than real’, they are an everyday reality for many of us. Hazard I. can also be a part of a broader “Landlord I.”, which bundles the coverage of several types of risks, where the hazard is just one of them. Bear in mind that Landlord I. typically doesn’t include losses of your tenants and your losses, which are other than the construct of a building (walls, ceiling, floor), so should you need to include possessions and appliances, this might cost extra.
  2. Liability I. This is the coverage for all happenings that involve people and their belongings. That usually covers your tenants, their guests, and your workers, should they get hurt or their belongings are stolen. Most states in the US do not provide that a landlord should insure the belongings, so if your tenants want to have their own I., then they should acquire it on their own. However, Liability I. covers you if someone’s in a hospital due to some injury and/or files a lawsuit, requiring from you some compensation. Breakages of major engineering facilities. Water, sewer, gas, electricity – if they go down and it hurts anyone or anyone’s belongings, or make it impossible to continue living in your premises (or timely limiting such a possibility), then this type of insurance covers those risks. You should find out whether having such type of I. would be a good idea for you (financially) at the time you buy the property. You should carefully inspect the condition of those mentioned to tell, what the real risks are.
  3. Rent default and vacancy risk. These need to be covered if not all of your tenants are super gorgeous in their solvency or if you don’t have 100% no-vacancy condition. Pet property insurance for investors. If you allow staying tenants with pets, you should consider covering their pets. This is usually made in two ways: coverage of losses caused by pets (chewed couch is something that every pet owner faced with at least once). Surely, we are speaking about those pets that are able to cause damage: cats, dogs, birds, rabbits, ferrets, pigs… That would exclude, maybe, only fish. The second way is to insure their life and health – should they fall off the balcony or something like that. But only if you’re not creating all the conditions to provide their safety (sometimes, even special certification may be required in order to avoid any possible lawsuits about pet’s death/hurt).
  4. Partnership I. For instance, you’re running a business with some partner and they decide to go out of business. That could be caused by any reason, including their death. To avoid your partner’s relatives or other partners overtaking their share in your business, you could cover yourself with the appropriate insurance for property, which would allow you to buy out their share first in the line.

Tips on selecting the right insurance for investment property

  1. Be honest. Don’t try to lower the cost of your I. policy while obtaining it by telling an insurance company this is not a business but private property. Remember that insurance companies make money in two ways: by collecting premiums and not paying for claims that were applied with wrong information./
  2. Replacement cost. If that happens so your property is destroyed to the ground, you should have adequate money to restore it. That's why always re-estimate the real replacement cost of your property before you make a new policy and renew it.
  3. Only pick those risks, which seem real and feasible for you, your property, and your area – to save money.
  4. Pay attention to deductibles. If the coverage payments have large deductibles (over 15%-20% of the sum), this is not a good deal, as you’ll have to have a lot of free cash in your pocket to cover these deductibles. On the other hand, lowering them below the market-average level could result in an increase in the cost of the I. policy.

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More about DGY

DGY is a real estate investment and property management company. Our experts have an impressive experience in turning businessmen into smart real estate investors. We collect limitless opportunities throughout the world’s best real estate markets and help our clients implement the best deals. We take care of all due diligence and customize documentation while your income grows. We also provide you with property management services so you can forget about the tiresome maintenance of several objects and entrust this process to professionals.

Investment advice and recommendations

DGY is an investment company that takes care of every client and helps them become successful investors. With the help of an investment experience and a well-thought plan, we will help you examine the market, choose a strategy specifically for you or your business, and calculate future costs to start making money with real estate investment.

Property management

In order to invest in real estate, you should consider how you will run your management in Ukraine. DGY will help you eliminate all possible pitfalls at an early stage as a personal project manager will be assigned to your case. They will assist you in choosing the project according to all required objectives.

Property Renovation

DGY Investments takes care not only of purchasing property but also renovating an existing one. With the help of a thorough plan and estimating, we will thoroughly prepare a property for sale. Our professionals evaluate an investment property and create a strategy that includes the costs for renovation, possible taxes, fluctuations on the market, etc. Therefore, our clients are able to resell the renovated properties in Ukraine with more than 15-20% profit from the initial price.

Paperwork

Before our clients decide to deal with real estate investing, they consult with our experts concerning details such as the necessary documents needed to purchase a property and successfully run all the processes connected to it.
Therefore, if you are eager to invest in Ukraine, it’s essential to have all the paperwork done correctly, and that’s the moment when our team of experts takes care of this step. DGY Investments helps investors buy real estate property, manage the paperwork, start preparing relevant documents for purchasing realty in Ukraine, and close the deal successfully.

Real estate investment opportunities in Ukraine

When an investor decides to invest in real estate in Ukraine, the most affordable way to attain stable passive income is through buying residential real estate. Investors can expect to receive a regular monthly payment from their tenants at a fixed monthly amount, unaffected by inflation or other unforeseen circumstances. The amount of rental income will vary depending on the size, type of property and location. For example, buying an apartment in Ukraine’s capital Kyiv is beneficial to investors due to offering a large working population, central location and affordable prices. Hence, the minimum price of renting a decent one-bedroom apartment in Shevchenkivskyi District will be around $1000 per month in 2021, followed by Pecherskyi District with a cost of $850 per month. Besides, investing in real estate in Ukraine annually brings clever investors up to 15% of yield, attracting many business people every year.

Properties for investments in Ukraine

Ukraine has a giant sector for real estate investing. Businessmen who come there all over the world often choose between investing in residential and commercial properties. The main advantage of buying property in Ukraine is the affordability of prices on the houses and apartments. For instance, if you invest in real estate in a historical district, a luxurious apartment will cost you around $80k only.

How to invest in Ukrainian Real Estate

In order to invest in Ukrainian real estate, you should take into account a list of crucial factors. The first one is to choose what kind of realty you are going to invest in: residential or commercial. It is vital as it should comply with Ukrainian real estate law. The second tip is to identify the purpose of purchase in order to make a strategy for the property. For instance, you may purchase the property for your own use or buy it for lease. The next step is to calculate the taxes and what kinds of taxes are payable during the purchase, owning, or selling. Also, to invest in real estate properly, you should keep in mind currency control rules in Ukraine to sell a property and get a higher profit.

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