Buying Insurance & Avoiding Risk
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Why buy insurance?
Can any agent help you?
How can managers avoid risk?
Property owners and managers must purchase insurance because they have a responsibility to preserve property and to protect tenants, their guests, and the public from harm. Owners and managers should evaluate their risks on a regular basis to determine their possible liability and financial loss, then carry the appropriate insurance to deal with the liability and property damage risks.
to top Buying Insurance is an ongoing process because insurance companies continually evaluate their exposure and target the areas of the casualty business where they think they need to increase, or decrease, business, to better balance their risk. Business insurance is in a constant state of change and you may find huge savings by shopping for the company that wants your business at the moment. As a result, property owners and managers are never through shopping for insurance.
Consider claims: Although it is important to shop for low premiums when selecting insurance, it is also imperative that you select a company that offers good claims service. You should also develop a good working relationship with the insurance agent or broker and talk with them several times a year about changes in insurance law and to make sure coverage remains adequate in type and amount. Your insurance agent can help make claims procedures much easier when you need them.
Keep records: Maintain a permanent paper file containing all insurance policies, proof of premium payments and any correspondence about insurance policies or claims. Under no circumstance should documents be discarded simply because your coverage or company has been changed. There are situations where years will pass between the purchase of a policy and someone making a claim for coverage; particularly if the claim concerns the health or injury of a child.
Know a good lawyer: Learn which lawyers in the community are experienced in insurance law from the perspective of the insured, not the insurance company. A brief discussion with an attorney may help a property owner identify the companies that are more likely to pay benefits when necessary. In that event, the lawyer will likely be able to negotiate far more effectively with your insurance company.
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Avoiding and managing risk on rental property can be complex and time consuming, involving a number of components and potential complications:
Avoiding risk: Certain types of risks may be avoided completely. For example, how important is a swimming pool or playground to your tenants and the rent amount they are willing to pay? There are a number of liability risks and costs connected to a swimming pool on the property. Those risks can be avoided by closing and filling in the pool.
Controlling risk: Many risks can be minimized by taking some preventative action. A good preventative maintenance program can help eliminate bodily injury and property damage. For example, a swimming pool could be enclosed by a high self-locking fence, with access to the pool limited to tenants. Fire risks can be reduced with smoke alarms and sprinklers.
Transferring risk
Risk is generally transferred by purchasing insurance and by sharing or transferring responsibility to the tenant by using clauses in the lease. Commercial tenants are almost always required to provide insurance covering their contents and indemnifying the landlord from liability claims as a result of the tenants negligence. A residential tenant's insurance police provides similar protection for the landlord. See the page on Tenant's insurance.
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