Finding the ideal property investment is only part of the strategy for success. Several factors go into the ideal property investment, whether it’s finding the right neighborhood, the best house, the right lot, or excellent amenities. Sometimes it takes the aid of an investment property management company to help you identify other issues that could affect your ROI.
One of these budget factors is your insurance costs, especially when protecting rental properties from natural disasters. You may not consider this when first purchasing a property. However, not having the right policies can leave you responsible for all repair costs when something unexpected happens to your property.
Our Salt Lake City property management team has the inside scoop on how nature can play a role in rental property returns (and what you can do to protect your investments).
Insurance and Your Investment Property
Whether it’s an automobile, life, home, or property insurance, people need the appropriate coverage for their properties or belongings. For rental property investors, landlord insurance is crucial protection they can’t do without.
Landlord insurance covers a property rented out to residents that don’t own the property. It’s different than a homeowners insurance policy you would use to protect your primary residence. In most cases, homeowners policies do not cover rental properties.
Without landlord coverage, you could be liable for tenant or worker injuries or face lawsuits if something goes wrong in the property (including when natural disasters strike).
Even if your renter has renters insurance, you still need a landlord insurance policy.
What Does Landlord Insurance Cover?
While policies differ, most landlord policies cover a few critical areas. Having this type of coverage is one of the best ways to protect your investments (and bottom line)!
Property Damage
You may suffer damage to the rental home due to a fire, vandalism, or some other cause. When that occurs, your insurance policy covers costs for repairs or replacements to return the home to a livable condition.
Lost Rental Income
If damage or another issue makes the home uninhabitable, you lose rental income. However, property owners can recoup some revenue during the time the house is unoccupied with the right insurance policy.
Liability Protection
This type of insurance can protect the investor landlord from lawsuits that may occur if someone is injured while on your property. Of course, you never know when something like this will occur, so having the appropriate coverage helps protect your rental property business if serious harm occurs.
If you’re not sure how to choose a policy that protects properties appropriately, the right property management professionals can help!
Do You Need Natural Disaster Insurance?
There are several other additional landlord insurance coverages that you can obtain, some of which may be relevant to your property. One such insurance addition covers natural disasters.
You might be wondering what type of natural disasters it will cover, and do you need that coverage? Keep in mind that your general policy may cover limited natural disaster issues, like lightning fires, hail, wind damage, and tornadoes.
However, not all landlord insurance policies cover potential acts of nature, like floods, hurricanes, and earthquakes. Therefore, it’s best to check with an insurance specialist and a property manager to ensure your policy provides the coverage you need and expect for a rental property.
Since Utah is known for its severe weather and is prone to natural disasters, it’s a good idea to consider how natural disaster insurance may impact your ROI. For example, the risk for earthquake damage is considered higher in Salt Lake City than the national average. However, the right Salt Lake City property management companies can help you find a property that would be in a lower-risk area.
How Does Insurance Factor Into ROI?
Insurance will be an additional expense to your current ongoing expenses for a property. To see the impact on your ROI, subtract insurance costs from the income you receive from the rent.
However, the bigger impact on your ROI goals would be the losses incurred during a natural disaster if you don’t have the right insurance coverage. Landlord insurance is far less costly than out-of-pocket repair costs if severe flooding damages the rental unit or the lost rental income while the property isn’t habitable.
What Can You Do to Counteract the Cost of Rental Property Insurance?
If you haven’t yet purchased the insurance you need (and you’re worried about the costs), you may be able to offset the insurance costs with a rental rate adjustment. Property management professionals can give you insight into raising the rent to ensure your monthly rental income covers all expenses.
The best solution to avoiding the hefty cost of additional insurance is to find a property that is not in a risky area. With the help of a property manager in Salt Lake City, you can find the best locations for purchasing properties.
A Salt Lake City Property Management Company Helps Maximize ROI
With the help of the property management experts at Reeder Asset Management, you can find ideal properties for your investment portfolio. We also guide property owners to the insurance coverage they need to protect investments and maximize returns. Get in touch for more information about our property management services today!
Learn more about what an excellent property looks like! Download “The Biography of the Perfect Investment Property.”