Do real estate companies and solo investors need to have liability insurance?
Liability insurance is often overlooked by many investors. Some don’t think there is any need for it, while others try to skimp on everything they can. Unfortunately, there are many that mistakenly think they are covered by other types of policies that they currently have.
Several real estate investing veterans swear by having extensive liability coverage with umbrella policies covering their businesses and properties.
All businesses are a potential target for lawsuits, but those in which property is owned may be at an increased risk. Imagine someone is hurt on one of your properties, a fire burns down a home, or an uninsured contractor falls off the roof. Any of these scenarios could bankrupt an uninsured real estate investor, whether it is their fault or not.
One lawsuit could jeopardize all properties and assets, both personal and business. Furthermore, one’s reputation may be tainted by the mention of a lawsuit. Having liability insurance can protect you from some of the many pitfalls associated with real estate investing.
The good news is that there are ways to protect yourself and your income. You can never count on third parties having the right coverage in place. Having liability insurance is simply smart business. It is probably a lot less expensive than you think too.
By dividing holdings under different legal entities, striving for maximum privacy and limiting exposure to liability at every step, real estate investing companies can decrease their appeal as targets for frivolous and malicious lawsuits. Having a great attorney or retainer is also a great way to deflect any claims, but never an excuse not to do your best to protect those on your properties.
The odds may be that you could go years without an issue, but it is that one time that can ruin everything. It will usually come at the worst moment and from a direction you don’t expect, so be prepared.