Investment property insurance is insurance designed to meet the specific needs of those who own investment properties. Often, standard policies that protect owner-occupied structures will not cover investment properties or will do so inadequately. Significant differences can also exist between insurance for investment properties and insurance for other types of real estate, such as a homeowner’s policy. Understanding these differences may be the key to protecting an investment.
One type of insurance that many investors consider is a complete package that will cover many of the common types of damages. The business owners' package available from many companies will include fire protection, as well as protection from theft and lost rent payments. This type of investment property insurance coverage is usually only available for buildings with at least four units. The age of the building may also be a limiting factor in whether this type of package is available.
When looking at investment property insurance related to fire coverage, two options represent the vast majority of policies on the market. The first option is what is known as the basic form. This is the most restrictive type of fire insurance, and if the fire is not caused by something listed in the policy, there is no valid claim. The other option is known as a special form policy, and will include most common hazards, although it may also name some exclusions.
Another part of investment property insurance to consider is flood coverage. In most cases, flood insurance is not part of a typical damage policy, but must be included as an additional option. Individuals considering buying an investment property and who are unfamiliar with the area should do research to determine if the area is one that is prone to flooding, and if any structures are at risk.
Specialty market insurance is an option for some property owners as well. This includes investment property insurance that covers properties that are typically very hard to cover with traditional insurance, due to the age of the structures or other high risk factors. For example, restaurants and bars, because of the nature of their business, usually fall under this category even if the building they are in is relatively new. This coverage may not be offered by all insurance companies, so it may take a little shopping around to find.
As with all insurance products, it is common for investment property insurance to set deductibles and coverage amounts. Some may only pay the appraised or assessed value of a property when a claim is made. Other policies may pay replacement values. Better coverage is generally going to require a higher payment.