Pre-Qualify For Insurance

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      Investors should seriously consider being pre-qualified for insurance cover before writing an offer for the purchase of a property.  There are two reasons for pre-qualifying.
      First, premiums can easily turn out to be a significant operating expense and need to be taken into consideration when analyzing the property.
      Second, and worse yet, it is possible that a particular property and/or landlord will turn out to be uninsurable.
      A property may be rejected for a variety of reasons. As examples, the building is sitting on an earthquake fault line, near a toxic waste dump or in an area subject to flash floods, hurricanes or fires.  The physical condition of a building might make it uninsurable.
      Similarly, investors might be turned down for insurance if they have a history of making too many insurance claims on a homeowner's policy or even for having a bad credit record.  You can even be rejected because of a claim resulting from an act of God where you are not at fault in any way.  While it possible that you can always obtain insurance at some price from some company, the cost might mean that the property doesn't make sense or require a larger down payment to pass lender analysis.
      The minimum types and amounts of insurance coverages the landlord buys must also be based on the requirements of the lender.  Accordingly, although you will almost certainly want coverages not required by the lender be sure to confirm its requirements.
      The more tenants, the more insurance must be purchased to cover the risks. The best insurance package for a landlord is usually the commercial liability policy, or a scaled-down version of that for smaller buildings.
      Such a policy covers damage to the building and to tenants' personal property, injured residents and guests, any kind of equipment used to maintain or heat the building, workman's compensation for anyone doing upkeep and storm or earthquake coverage in areas prone to such disasters.
      Finally, even though you are certain that you will qualify for the necessary and desired insurance coverages at an acceptable cost, if you do not pre-qualify prior to writing a purchase offer, it is highly recommended that qualifying for acceptable coverages be included as a contingency.

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