A lot goes into the search for the right investment property. One factor that is typically not considered is how difficult it may be to insure the building/structure. Most investors do not realize the importance of researching a property to determine the insurance risks associated. If it is difficult to find insurance coverage, you run a high risk of being partially or severely under insured and/or paying a huge insurance premium.
The following are key insurance factors to consider when purchasing an investment property:
Location
Location, location, location. That’s the saying right? In insurance, it is more important than ever. Carriers have tightened guidelines and have become more critical when reviewing a property for acceptance. In California, the recent history of wildfires has insurance companies working to manage their risk and has even forced some companies to leave the state entirely.
Here are some factors to think about regarding location:
- Is the property location prone to natural disasters? Flooding? High Winds?
- Is the property close to brush, hillsides, canyons, or forests?
o If you are in a high-risk fire zone, it may be difficult to find coverage.
- Is the property close to the coast? At risk for Hurricanes? Ocean Storms? Tidal Waves?
Age and Condition of Property
How old is the property? Is it in good shape? If the property is more than 50 years old and has not been updated, insurance companies will consider you to have a higher probability of experiencing a claim versus a newer/updated property.
When an insurance company reviews the properties’ risk it considers the age and condition of the following:
- Roof
- Plumbing
- Heating
- Electrical
These should all be updated or replaced in the last 20-25 years.
History of Claims
Does the property have a history of claims? Insurance carriers review the loss history of a property and can even review claims from a previous owner. This could affect the premium or even the eligibility of the property.
It is highly recommended to request a history of losses from the current owner and review the property’s prior insurance claims.
It is important to understand the costs and risks associated with purchasing your investment property. Talking with an insurance agent/broker can help you understand an important part of the picture and provide peace of mind knowing your investment can be protected.
For a review of your current policy, or to request a free quote please reach out to Rob by clicking on the link below.
Ives Insurance Services is a full service, independent agency that has been in business for over 60 years. We write all lines of coverage with a strong focus on property.