Friday, November 4, 2011

Real Estate Investor Mistake # 4 - Not Having Enough or the Right Insurance

This is an area that many people forget about or believe they have sufficient insurance but in fact don't.  What kinds of real estate activities are you involved in?  Are you driving people in your personal car or truck and showing them properties?  Your personal car insurance probably doesn't cover you for this type of activity because you're using it for commercial purposes.

If a contractor you hire doesn't have liability insurance coverage, and he gets injured or injures someone else while on your property, you may be held liable and are probably not covered.

An friend of mine told me a story about what happened to him a few years ago....He left his own home for vacation and he had a fenced yard.  While he was away, the next door neighbor's teenage son tried to climb this fence to get onto my friend's property for some reason, and ended up breaking his neck and was suddenly a paraplegic.  The neighbors sued my friend and won.  The lawsuit was in excess of $2 million yet his coverage was only $1 million under his insurance policy.  He was out of pocket for the rest.  True story.....He did nothing wrong, and had a fenced yard as required by law to enclose his pool.  You don't need to be guilty to be guilty in the 21st century.

Another pointed example is a recent telephone conversation I had with a seller in Indiana, and he had a property with 32 units that he intended on repositioning but ran out of money, so he was selling it completely vacant.  Not a good situation, and even worse, his property was vandalized with thieves breaking in, and stealing among other things, the copper wiring and the copper tubing used for the plumbing.  Unbelievable what some thieves will do!  Yet, it happened and this poor fellow did not have insurance on his property because he was trying to "save some money".

Don't make the same mistakes that others have done, and the best way to check is to talk to a knowledgeable insurance broker to discuss your insurance needs.  You don't have to be over-insured, but being under-insured can be disastrous.

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