Investment Property Insurance - How Important?

As is the case for insurance on your own personal residence, properly insuring your investment property is extremely important.  Protecting this asset with proper coverage is essential and helps ensure your overall investment strategy, doesn’t evaporate through an unforeseen event.

Building insurance generally covers total or partial building loss as to an agreed upon policy amount. Coverage should be sufficient to cover any damage based on relevant estimates of current replacement costs – ie. if $125/ ft. is the current figure to replace a commercial building in the event of a total loss, then that’s the level of coverage you need to have in place.  If you choose to ‘under insure’ by taking out insufficient coverage, you are in reality ‘co-insuring’ the property. In this case, you will be responsible to pay any amounts above and beyond what the insurance coverage provides for.

Landlord’s insurance generally covers loss of income and tenant damage.  Loss of income would be coverage if a property was unfit for rental purposes for a period of time. With respect to Tenant damage issues, it could cover default by the tenant due to vandalism, theft or malicious acts.

There are certainly other specific coverages that you may need for your specific purposes – ie. accidental plate glass breakage, power failures/surges, sewage back-up, to name a few.

Best practice here, is to review your requirements with your commercial insurance broker, making sure you have a comprehensive analysis done on your specific property.  As always, seek out the advice of experienced commercial realtors within your market, as you review your property insurance options.