Insurance is an important component of business today, especially when it comes to real estate.
There are many types of insurance to have and most are essential when viewed objectively.
Let’s first identify what insurance really is: “a practice or arrangement whereby a business or government agency provides a guarantee of indemnification for specified loss, damage, sickness, or death in exchange for payment of a premium”, or a simpler statement: “a thing offering protection against a possible contingency.
The high frequency of insurance in real estate is due to the number of people involved. Homes cost hundreds of thousands of dollars and need to be protected with title insurance, fire insurance, and other insurance. Home repairs cost hundreds or thousands of dollars that can be avoided with a home warranty insurance policy.
Title insurance is mandatory if you have a loan and recommended even if you don’t. It protects you against liens that are public records that have been registered against the property. It is important that you know that you have a clear title when you buy the property or approve the items registered there. Like most insurance, you’re unlikely to need it, but when you do, you’ll be glad you have it in place.
Renter’s insurance is important to landlords as well as the renters who purchase the policies. It covers their content as well as the structure and some liability. It is very important for a tenant to have insurance because most do not have the cash to self-insure in the event of a situation with significant 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 flood conditions for 500 years, or less depending on the flood zone you are in.
Earthquake insurance is not required in our area, even though Nevada has the third highest frequency of earthquakes behind Alaska and California. Again, you have to make your own assessment of the risk of not having a policy.
Home warranty policies are also entirely optional and a personal choice. The base policy isn’t too bad, $350-$400, but as you add riders for things like well pump, air conditioning, etc., the price can go up. This is a one-year policy that pays you well if you need to file a claim. Purchasing a home warranty policy will give you comfort for one year and you can renew the policy every year if you wish.
If you live in an HOA, you can check what coverage 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 better protection against litigious predators. If you own land in addition to your house, your home insurance policy usually covers you on the land for liability, but confirm with your insurance agent. Do you have any features that would invite people to your property i.e. a swimming pool. They are called an attractive nuisance and should be mitigated to reduce your insurance costs.
Our tip: Insurance policies make you feel safe, safe, safe. Understand what you’re buying and what’s covered. Insurance costs money, but so do the consequences of not having it when you want it. The nature of insurance is that no one knows if you will really need it. Not the seller or the consumer. It’s a bit like the Nevada game for business, it’s a gamble. It’s certainly nice to be properly covered when you have a title issue, experience flooding, or have a furnace reaching the end of its economic life.
Evaluate the feeling of being covered against the risk of a financial hit due to lack of coverage and make your buying decision accordingly. Each situation is unique and should be assessed on its own merits.
When it comes to choosing professionals to help you with your real estate needs… experience is priceless! Jim Valentine, RE/MAX Realty Affiliates, 775-781-3704. [email protected]