When you study the different paths wealthy people have taken to become successful, you’ll see a common thread in almost every situation. Regardless of what they’ve done and what businesses they’ve created, real estate investing is almost always involved in some form or fashion.
As you consider ways to pursue financial freedom and build wealth, real estate should immediately come to mind. And one of the quickest ways to get your foot in the door, especially if you don’t have massive amounts of capital, is to try your hand at residential rental properties. It won’t turn you into a millionaire overnight, but it will allow you to steadily build wealth over time.
But whether you start with one measly house or have the means to invest in an entire portfolio of properties, nothing is more important than protecting your investment. And one thing, in particular, that you’ll need is landlord insurance.
3 Things You Need to Know About Landlord Insurance
Put simply, landlord insurance is a policy that covers property owners who are renting out one or more residential homes or apartments. It protects you against financial loss associated with severe weather, fire, break-ins, and destruction by tenants. While you may be tempted to go without it, do some research and you’ll find that landlord insurance is always worth it.
Here are a few things you need to know:
- Covers Loss of Income
“It’s impossible to control every aspect of your property, and if your tenants find a mold infestation and have to move out, you’ll lose out on payments unless you have loss of rent coverage,” Green Residential points out. “This ensures that you’ll receive a rent payment if the property is deemed uninhabitable, so long as you’re working to get it back up to an inhabitable level.”
This is one of the biggest advantages of having landlord insurance. Not only does it cover repairs, but it also compensates you for the loss of income that you would have earned via rent during that time.
- Protects Against Liability
One of the scarier parts of renting out a home that you own is that you don’t have control over what renters do on the property. Sure, you can set up some ground rules and include various clauses in the lease agreement, but it’s ultimately up to them to follow the rules. Thankfully, most landlord insurance policies come with liability coverage.
With liability coverage, you’re protected against claims and lawsuits that tenants, visitors, and even trespassers bring against you. This can cover any number of costs, including legal fees, settlement expenses, medical payments, funeral costs, and other related fees.
- Homeowner’s Insurance Usually Isn’t Adequate
A lot of first-time landlords are confused as to why they need landlord insurance in addition to homeowner’s insurance. Well, the fact of the matter is that homeowner’s insurance is usually only valid when you’re actually living in the property. Renting it out to another individual usually voids the policy. (You can learn more about this by reading the fine print of your policy.)
Generally speaking, landlord insurance is very affordable. It only costs a few dollars, yet could potentially save you millions. And even if you never need it – which is ideal – it provides an enormous amount of peace of mind.
Protect Your Investment With Landlord Insurance
Insurance isn’t the most attractive topic in real estate investing, but it’s arguably one of the more important. A failure to protect your investment could result in massive losses that set you back for years to come. Do the right thing and insure yourself against factors you can’t control.