Ah, That False Sense of Security!
At some point in your real estate career, you are probably going to hear advice that will go something like this . . .
“Don’t pay for so much insurance! Just hire a company to manage your property and let their insurance cover you! You’ll avoid paying for insurance you don’t need.”
Of course, there is a grain of wisdom in that advice. The insurance held by a management company you hire does provide coverage—but never enough.
The safest way to be sure you are fully protected is to buy and understand your own policies.
Property Insurance
Property insurance protects you from actual losses, such as buildings that burn down or are destroyed in natural disasters. If you occupy a property that you own, property insurance can also protect you from theft, damage to belongings, and other losses.
Property insurance can protect you in other ways too, serving as a defense against claims made against you as the owner of real estate. If a tenant loses all her furniture because a pipe bursts in a ceiling over her apartment, for example, or if she falls down and breaks an ankle in the lobby of your apartment building, your insurance will pay some or all of any judgments made against you. It also helps cover the costs of mounting your legal defense. Lawyers can be very expensive.
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