The cold hard truth is this: all property investing comes with its own risk.
There’s no way around it.
Risk is a natural part of investing – whether it’s in real estate, the stock market, buying a business or something else entirely.
Luckily, there are several risk mitigation strategies that investors can utilise to help put their minds at ease.
Of course, when it comes to real estate, one key investment strategy that you can employ is using investment property insurance to mitigate your risk.
From personal insurance to property insurance, there are several different policies available all designed to protect you as a property investor and ensure you can continue to move towards your financial goals when unforeseen circumstances arise.
To help you understand what’s best for your situation, we’ve put together this helpful guide on the different types of property insurance and how they work to mitigate risk so you can achieve success on your property investment journey.
Table of Contents
- First, what are some of the most common risks associated with property investment?
- What are the different types of property insurance available to real estate investors?
- Personal Injury and Income Insurance
- Landlord Insurance
- Building Insurance
- Of course, investment property insurance is just one of many real estate risk management strategies to consider
- Do you need help finding the best investment property insurance to mitigate your property portfolio risk?
First, what are some of the most common risks associated with property investment?
It’s important to acknowledge that some property investments carry far more risk than others, and choosing the right investment strategy for your unique situation will largely come down to your level of risk tolerance.
However, here are some of the most common risks that you’ll typically see across the board:
- Vacancy periods
- Difficult or destructive tenants
- Unforeseen expenses
- Interest rate hikes
- Tight cash flow
- Personal injury or loss of income
Of course, some of these can be managed with simple risk mitigation strategies, such as building a cash buffer, while others require a more considered approach.
This is where insuring yourself and your investment property comes in.
What are the different types of property insurance available to real estate investors?
Property investment insurance typically falls into two categories:
- Property Insurance
- Personal Insurance
While many investors are generally aware of property insurance, personal insurance is the one that can often be easily overlooked – whether it’s a lack of understanding of the benefits or a simple belief that they just don’t need it.
Of course, no one needs investment property insurance until they do.
That’s why it’s always best to be prepared, especially if you have a conservative risk tolerance.
To help, we’ve outlined the three most important types of property insurance for real estate investors.
Personal Injury and Income Insurance
Also known as Personal Accident and Illness Insurance and Income Protection Insurance, these are absolute musts for any property investor.
Why?
Because no one is immune to certain situations, such as losing a job, suffering an injury or falling ill.
It can happen to anyone at any time, and each of these situations can potentially mean an extended period with no income to service a mortgage or cover regular property expenses.
Of course, with the right personal insurance policy in place, property investors like you can feel confident that they have a financial backup option – allowing them to minimise the risk to their property investment journey.
Landlord Insurance
Equally important is Landlord Insurance.
While smart investors take all the right steps to ensure they get a reliable and respectful tenant, the reality is that’s not always the case.
You don’t have to search too hard to find a horror story about poor or unruly tenants that greatly emphasises the importance of having Landlord Insurance.
A solid Landlord Insurance policy covers property investors for:
- Instances of theft or damage by tenants,
- Loss of rent or legal fees associated with a poor tenant,
- And much more.
For investors, this means not having to take a substantial financial hit due to the actions of another party, greatly minimising the risk to their property portfolio and investment goals.
Building Insurance
While Landlord Insurance covers property damage at the hands of a tenant, Building Insurance covers property damage due to unforeseen circumstances, such as a storm or fire.
Of course, these types of events are not only unpredictable but also unpreventable by nature, which is exactly what makes Building Insurance so important for property investors.
When disaster strikes, property investors can have full confidence that they can get access to the funds they need to repair the damage as soon as possible and start earning a rental income again.
Building Insurance is a crucial element of every real estate investment strategy to help mitigate the risk of unforeseen disasters for investment properties.
Of course, investment property insurance is just one of many real estate risk management strategies to consider
While investment property insurance is one of the best strategies available to help mitigate many of the risks associated with property investing, it is by no means the only one.
From building a cash buffer to seeking professional advice to doing your due diligence and so much more, there is a whole suite of risk mitigation strategies available to you, each designed to give you the best chance of investment success.
To learn more about property insurance and discover the additional strategies available to you, speak to our team today.
Do you need help finding the best investment property insurance to mitigate your property portfolio risk?
At inSynergy, our expert team is here to help you.
inSynergy is a full-service and specialist Property Investment Advisory firm dedicated to helping you learn how to use property investment and finance as a tool to build a more secure future.
We provide our clients with a broad range of professional services designed to assist with all aspects of property investment, including property investment education, property investment strategy, finance and mortgage broking, and sourcing high-growth investment properties.
Through every interaction with you, our focus is on helping you to safely build a successful property portfolio and achieve your financial goals without sacrificing your lifestyle.
Get in touch with us today to discover how inSynergy can help you on your investment journey.
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Please note, that this article and the information in it is general and not to be considered as financial advice. However, you can book a meeting with us for personalised advice tailored specifically to you.