The following guest post is brought to us by Shaun Kilburn of AAA Insurance. Be easy on him. 😉 It’s his first post!
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Investment properties are a wonderful asset and provide both short term and long term earning power on your money. As an insurance agent and property investor I find it hard to believe that owners of properties don’t shore up their risks in several key ways. The hard truth about liability insurance is that as your assets go up so should your liability insurance. Your primary residence has normally up to $500,000 worth of available liability protection. But what happens when your net worth starts creeping up over that amount? Well you had better start by speaking with a reputable insurance agent. Your assets are vulnerable to law suit once you have more than your home or umbrella insurance policy allows.
Many properties start to become more valuable than previously thought as your rents go up whether the market is moving sideways. Your primary residence, investments property, and assets not in a trust will be discovered by an opposing attorney who has done an asset search in the event of a lawsuit. Your umbrella policy should be valuated at more than you are being sued for. The attorney can chose to sue you as the policy owner or you as the individual based on where there is more money. All the attorney has to do is sue for more than the liability limit will cover. If your worth is more than the liability limit on your policies, look out, you’re in for a bumpy ride.
All this anguish can be avoided by taking out a simple umbrella or excess limit liability policy. They are the cheapest form of insurance and although a million dollar policy sounds expensive they usually run less than $200 a year. That’s right, less than $200 and you are as close to bullet proof as you’re ever going to get. Do yourself a favor today and call a reputable insurance agent with at least an A rated company (A.M. Best). Your investments are too valuable to leave to chance.
Another area of concern is making the appropriate disclosures as to the type of policy you carry on an income property. There are many kinds of policies from straight renters to builder’s risk, non-occupied dwelling, improvements and betterments policies etc.
Each time you change the parameters of the original contract, you need to contact your insurance agent as you may find yourself with no coverage in the event of a loss. Most companies do not like non-occupied dwellings. If you started out with an occupied unit when you signed the contract, and your property becomes vacant for an extended period of time, say over 60 days, you may find that you need to change your property to a non-occupied policy or at least disclose your situation to your agent and go from there. Many times the insurance company will work with you, and as long as it is documented that your situation has changed. In the event of a loss if you have notified your agent then when the claims adjustor does a loss assessment any changes in occupancy or other structural changes will be accounted for and your policy will most likely pay out.
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For questions or quotes you can contact Shaun Kilburn of AAA Insurance at:
816.931.5252 x 173