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Insurance and Risk Management for LandlordsIf you're a hard working residential landlord whose goal is financial independence, insurance and risk management can provide the safety net needed to protect your valuable investment property and other assets. Lets face it, no matter what precautions we take and how careful we may be, bad events can still take place. Maybe it has something to do with Murphy's Law?
The Practice of Risk Management
Most of us practice risk management in our daily lives without giving much thought to it. Putting on seat belts, holding onto a hand railing while going down a flight of stairs, or getting a flu shot are all examples of risk management. These actions protect us and reduce our risk of getting injured or sick.
Risk management can also be applied to protect the health and well being of your investment property as well. In the litigious world that we live in today, anyone running a business, and that certainly includes landlords, can easily get tangled up in a lawsuit having to defend themselves. Such a predicament can cause serious damage to your wealth, and also affect your health as well - just imagine the anxiety!
If you want to get an idea of the litigious climate we're living in today, just turn on the TV set and see all the law firms advertising for business. Based on this alone, it's definitely worthwhile to address the risks of personal injury and lawsuits that are becoming so prevalent today.
Risk Management for Residential Landlords
So, as a landlord, how can you establish a risk management program to minimize your liability? For starters, lets identify some of the various sources of legal liability that residential landlords could be faced with…
To protect yourself against these liabilities, at the very least you should adopt a risk management program that:
1. Provides for routine inspections of the property that identifies (and repairs) any problem areas or hazards that could lead to personal injury or property damage. These could relate to…
2. Applies fair housing and discrimination laws across the board with all tenants and tenant applicants. 3. Requires anyone working on the property to use safe work practices and to have their own liability insurance should they become injured on the property. 4. Prohibits tenants from keeping dogs (except guide or other handicap service dogs) on the property. 5. Requires you to learn and practice the laws that govern landlord-tenant relationships in your state and local area. 6. Provides adequate liability and property insurance coverage for the property, and 7. Screens the civil and criminal backgrounds of new tenant applicants.
Insurance for Residential Landlords
For additional protection against claims that may exceed policy limits, landlords (or any property owner) can purchase umbrella insurance policies . An umbrella insurance policy "kicks-in" after the original insurance policy has paid its maximum coverage amount. This is a great emergency safety net to have, and really strengthens a landlord's insurance and risk management program.
In addition to the above insurance and risk management measures, landlords can form separate entities such as limited liability companies to take ownership of their properties. This form of ownership provides further protection of a landlord's personal assets.
For additional in-depth information on insurance and risk management, please visit The Landlord's Library book collection. You'll find all the high-value information you need on the entire subject of residential landlording. Your bottom line will truly benefit from it!
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Insurance and risk management go hand-in-hand. Having the right kind of insurance, and in adequate amounts, is vital for residential landlords to protect their hard-earned assets. At minimum, residential landlords should be protected by two types of separate insurance coverage…