When you buy a new property, one of the most important steps you have to take is to make sure it’s properly insured. Real estate is a major financial investment, and if you’re not covered in case something goes wrong, such as a fire or flood, it can wind up costing you substantially to rebuild and recover your investment.
Insurance can be complicated, and what you need depends on the type of property, where it’s located, and local risks.
1. Getting Coverage for Flood Insurance
Flood insurance may not be a regular part of your home insurance policy. When you purchase a property, you should look into local flood plain maps that show whether or not the property is at risk for flooding or if it could be in the future. Then make sure you can actually get coverage from a provider.
There can be a significant sum of money at stake in the flood insurance claims process. In addition to making sure you have flood coverage to begin with, review the limits for contents. Be cautious of attempting to restore water-damaged possessions, since this can end up costing more than simply replacing them.
2. Check Your Structure Coverage
Is your insurance policy enough to cover the true cost of rebuilding? Not only should new homebuyers keep this in mind, but if you’ve been in your home and had the same policy for some time, you should know that construction costs have been going up quickly across North America.
In some cases, the costs have surpassed inflation guards included in most policies. You may need to do your own research. Get quotes from local builders for cost per square foot and compare the answers to your coverage.
3. Insurance for a Rental Property
When you invest in a rental property, your insurance covers the structure but not the property of any tenants. It may be prudent to require that tenants get renters’ insurance, which will cover the loss of any of their personal belongings, as well as Additional Living Expenses, such as renting another unit while theirs is being repaired.
4. Insurance for a Vacation Home
You can usually include insurance for a vacation home in your primary residence insurance, but there are some important differences to know.
- Regular wear and tear are not included. Basic repairs, including the roof, are something you still need to cover yourself
- Damage from rodents usually is not covered by your policy
- You may need to get extra coverage for septic or sewer backup
- You may have higher premiums due to higher risks of theft and other damage if the property is a vacation property because it will be left vacant for extended periods of time
5. Check Your Limits and Deductibles
The details of your policy make a big difference. There are two things you need to double check to make sure you’re financially prepared for a fire or flood: the policy limits and your deductible. Your coverage limits are the maximum amounts the insurance company will pay out for each portion of your claim. Any costs beyond this are going to be your own responsibility.
The deductible is the amount that you will have to pay before the insurance kicks in. It’s cash that you should have readily available in an emergency fund.
Protect your new property and your finances by making sure you’re properly insured.