Proper insurance for your investment properties is a necessary expense, and the time spent buying the insurance is time well spent.

Our recommendation is that our clients first contact their homeowners’ insurance agent and ask if “fire/dwelling and liability insurance is available for a Texas investment property under our current homeowners’ policy”. Some owners’ coverage will cover out of state investment rentals, and it will often be the cheapest way to obtain insurance.

Should your homeowners’ insurance not provide coverage, we recommend that you call Rick Gozaydin with Group Insurance here in Central Texas. Rick insures all of our personal investments, and has a highly trained staff of insurance professionals specializing in investment property insurance. He understands the ins and outs of investment property, and can advise (politely and quickly) clients as to which options make the most sense for them. Rick Gozaydin may be contacted at (210) 826-3838 or via email at rick@insurehere.com.

Regardless of your insurance provider, make sure you get the following items on your policy:

• “Loss of rents” (to reimburse you in case there is property damage preventing rental income)
• “Water coverage” (water is the most expensive loss risk after fire)
• “Replacement value” (so that your property is replaced at the actual cost to replace it). “ACV” or “Actual Cash Value” is often offered at a lower price, but is a poor choice because construction expenses have been rising, and the ACV value of your property may be lower than its replacement cost, requiring the owner to come out of pocket, possibly significantly.
• “Liability coverage” (as an extra layer of protection). This is usually a few dollars extra per month, and worth it, even if there’s a 99.9% chance you’ll never use it.

If you are purchasing three or more properties, have a significant net worth in need of shielding, or own other properties in other states, you should also consider purchasing a “Commercial General Liability” policy otherwise known as a “CGL” policy.

These can often be purchased in the $2M or higher range and are a cost-effective way of further managing risk.