Top 13 Insurance Myths for the Real Estate Investor… www.nreinsurance.com [email_address] 888-741-8454
Insurance: The archer in your watchtower, not your castle walls… To protect Personal and Business items within your castle, Insurance should NOT be the foundation … of an asset protection strategy. With the advice of a legal professional, the legal entities you create are the castle walls, the moat and the watchtower you build to protect them… - Carry as much Liability Protection as you can afford - A “Commercial” or “Personal” policy can determine your exposure to liability. - Avoid the pitfall of thinking ‘Umbrellas’ are a panacea!
1. Insurance is exclusive of… estate, tax, and financial planning. To keep nasty things at bay - like liability claims, fire, windstorms and other catastrophes - think of insurance as the archer in the watch tower or the knights with the boiling oil. What we try to create is a summation of the needs and issues in which tax, financial and even estate planning must be taken into consideration. As the archer does not hit every target, we all know insurance does not cover every thing. The list of exclusions in most policies is more than a paragraph. That stated, the archer and knights (insurance) need to work in conjunction with the castle walls and the moats (legal entities) to appropriately protect your “stuff”. And don’t forget (WC)…
2. Being named as an “additional insured” on the existing homeowner policy will sufficiently protect my interests in a subject-to and/or lease-option deal… Insure the proper entity! "Creative" acquisition strategies, and how to properly protect you and your entity(ies):
3. Buying a property in your personal name and using your homeowner’s policy liability is fine…
4. The “personal” dwelling fire policy is sufficient (“cheap”) to cover my non-owner occupied rental…
5. I have a personal umbrella policy (PUL), so I don’t need “commercial insurance”… Like most insurance polices, your personal umbrella protection contains much exclusion. Many "umbrellas" are technically "excess" policies. Coverage for only that which exceeds underlying limits. One of the most glaring for the real estate investor is the “business pursuit” exclusion. In other words, your PUL is designed for “personal” exposures If your real estate investment(s) aren’t a “business pursuit”, then you need to consider divesting! A commercial umbrella over and above the liability in your commercial package policy is appropriate. It however, may not always be worth the premium. Unless your "castle walls and moat" are built appropriately, uncovered wexposures (harrassment, as an example) may leave you un-protected.
6. A claim that occurred before I (or my entity) owned the property shouldn’t affect MY insurance rate…
7. “All-risk” insurance covers everything I need…