Insurance is an important component of business today, especially when it comes to real estate.
There are many types of insurance to be had and most are must haves when looked at objectively.
Let’s first identify what insurance really is: “a practice or arrangement by which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium,” or a simpler statement: “a thing providing protection against a possible eventuality.”
The high frequency of insurance in real estate is due to the numbers involved. Homes cost hundreds of thousands of dollars that need to be protected by Title Insurance, Fire Insurance and other insurances. Repairs to homes cost hundreds or thousands of dollars that can be avoided with a Home Warranty Insurance policy.
Title Insurance is required if you have a loan and recommended even if you don’t. It protects you against liens that are of public record that have been recorded against the property. It is important that you know you have a clear title when you buy the property, or approve the items that are recorded against it. Like most insurances, there is little likelihood that you will need it, but when you do you will be happy to have it in place.
Renter’s Insurance is important for property owners as well as the tenants that buy the policies. It covers their contents as well as the structure and some liability. Very important for a tenant to have insurance as most don’t have the cash to self-insure in the event of a situation with large financial consequences.
Flood Insurance will be required if your property is in a FEMA designated floodplain and you have a loan. If you don’t have a loan you don’t need the policy, but you will need to consider the likelihood of experiencing 500-year flood conditions, or less depending on the flood zone you are in.
Earthquake insurance isn’t required in our area even though Nevada is third highest in earthquake frequency behind Alaska and California. Again, you have to make your own evaluation of the risk of not having a policy.
Home Warranty policies are also entirely optional and a personal choice. The basic policy isn’t too bad, $350 - $400, but as you add riders for things like well pump, air conditioning, etc. the price can climb. It is a one-year policy that pays you well if you need to file a claim. Buying a Home Warranty policy will give you comfort for a year, and you can renew the policy each year if you like.
If you live in a HOA you might check to see the coverage that they have and how you are protected individually and as a community. If you have a lot of assets you might want to consider an umbrella policy that will give you greater protection from litigious predators. If you own a lot as well as your home your homeowner’s policy usually covers you on the lot for liability, but confirm with your insurance agent. Do you have features that could invite people on your property, i.e. – a swimming pool. They are called an attractive nuisance and should be mitigated to keep your insurance costs down.
Our Advice: Insurance policies make you feel safe, safe, safe. Understand what you are buying and what is covered. Insurance costs money, but so do the consequences of not having it when you wish you did. The nature of insurance is that nobody knows if you will really need it. Not the vendor or the consumer. Its kind of like Nevada gaming for business, it’s a gamble. It is sure nice to be covered properly when you have a title problem, flood experience, or a furnace reach the end of its economic life.
Weigh the feeling of being covered versus the risk of the financial hit from the lack of coverage and make your decision to purchase accordingly. Each situation is unique and should be evaluated on its own merits.
When it comes to choosing professionals to assist you with your real estate needs… Experience is Priceless! Jim Valentine, RE/MAX Realty Affiliates, 775-781-3704. dpwtigers@hotmail.com
