Real estate offers you an effective vehicle to grow your wealth. These kinds of assets often appreciate over time. However, getting into the game will require you to invest a significant amount of money first—unless you inherit the property.
The average cost of a home in Utah is about $408,500, and there are other costs of buying and maintaining a home for rental purposes. These include closing costs, taxes, HOA fees, insurance, and home repair costs. Even if you inherited your investment property, it may have a backlog of taxes you must first pay off.
It may be tempting to try and cut corners to save money (like skipping insurance coverage), but don’t even think about it! When you consult with a reputable Salt Lake City property management company, they will recommend the right insurance coverage. Here's what investors need to know about insurance for rental properties.
Why Do You Need Insurance Coverage for Investment Properties?
Insurance for your investment property is not a luxury—it is a necessity! You will need it to safeguard yourself financially for several reasons.
Natural catastrophes caused $74.4 billion worth of losses in 2020 alone. There is no guarantee that your rental property will withstand the wrath of Mother Nature the next time she strikes. Without the right insurance protection, the next earthquake, tornado, hurricane, etc., could mean the loss of thousands of dollars. To safeguard yourself from such losses, ensure that you have the right insurance coverage for your needs.
Other Types of "Unnatural" Damage
Even in the best Salt Lake City neighborhoods, your property could be at risk of acts of vandalism and accidents that may occur within your rental property. Your renters may be responsible for some of them. Others accidents could be a result of your negligence. Landlord liability coverage helps protect investors from these kinds of problems that can lead to a lawsuit.
Alternatively, your renter could damage your property, then disappear and leave you to deal with the costs of fixing their mess. If you have insurance, you don’t have to be liable for anything. Your insurance coverage will cover the expenses, and you won’t have to deal with the financial losses.
Homeowners Insurance Is Different From Renters Insurance and Landlord Insurance
Is homeowners insurance enough? If renters have renters insurance, do investors still need landlord coverage? Yes!
A property manager can help you understand the difference between homeowners insurance with renters insurance. Homeowners’ insurance covers a private residence not operated as a rental property. When you allow renters into your home, most homeowners coverage no longer applies.
Landlord insurance is a variation of homeowners insurance that's specific to rental properties. This kind of insurance will cover all structures associated with the property and your personal belongings within the rental property—like lawn equipment or other tools used to maintain the residence. It can also include appliances and furniture.
Renters insurance, on the other hand, covers your residents' personal belongings. In case of a disaster or vandalism, the insurance covers repairs or replacements for them without holding you liable for damage outside of your control.
Property owners are responsible for paying for landlord and liability insurance. However, your renters are responsible for renters insurance.
A Property Manager Can Help You Determine the Right Coverage for Your Property
How much insurance is too much? What kind of insurance coverage is best for your needs? You might not be sure! However, a local Salt Lake City property management professional can help you. Many factors affect the premium amounts you will need to pay and the ideal coverage that's right for your rentals.
The location of your rentals matters for several reasons. If it's in an area with a high crime rate, your chances of dealing with vandalism are high. Also, if your location is prone to natural disasters, you are likely to experience more damage. For these reasons, both you and your renter may need to pay higher insurance premiums.
Rent loss coverage may also safeguard you from loss of income if your renters can't pay the rent or your property becomes uninhabitable due to damage. Premiums for this kind of coverage can depend on the monthly rent price for the property.
The age and condition of your property can also affect your insurance premium costs. Taking excellent care of your Salt Lake City properties with the help of a property manager can help reduce your insurance costs!
Protect Your Investments With a Salt Lake City Property Management Company
As a real estate investor, you must protect yourself from liability and keep your investments safe from damage and income loss. That starts by understanding the need for insurance and the types that you should pay. Determining the coverage you need is easier with the help of Salt Lake City property management professionals. Let Reeder Asset Management help review your current coverage and help you find the protection you need.
Learn more about protecting your investments! Download our free resource, "Protecting Your Investment Property: A Guide."