Selecting an Insurance Policy

[Amad Osman]

Hey Guys,

I'm closing on my first investment property next week (a 6-unit residential property) and I'm shopping for an insurance policy.  For commercial units what factors should I be considering other than the obvious policy cost and deductible when selecting a policy?  Thanks in advance... 

[Michael Badin]

@Amad Osman More than cost you should be concerned with coverage.  You want to get replacement cost coverage.  It will cost more but if a fire or other catastrophic loss was to occur you will be glad you have it.  You want to make sure the coverage you get is enough to actually rebuild the property in the event of a fire and not simply cover the cost of your mortgage.  Again this costs more, you need to evaluate cost vs coverage and get a good balance between them.  Go heavy on liability.  If you have a primary residence and are buying the rental in your personal name get insurance for both properties with the same company.  Find one that will allow you to "stack" your liability coverage.  This means your liability coverage from property A will also cover property b when property b's liability coverage runs out. You will also want to get at least a $1,000,000 liability umbrella policy on top of that.  I go heavy on liability coverage.  

Make sure it also covers any personal property that you have at the property such as refrigerators.  Get your tenants to get their own renters insurance and have them sign something confirming that they understand your policy does not cover them and that they should get their own coverage.  I have this as an addendum to my lease.