| One of the least considered, but perhaps | | | | carry a sufficient amount of liability |
| most important aspects of successful | | | | insurance to protect themselves and |
| real estate investment is insurance | | | | their personal assets. It may also help |
| against losses. Even though the market | | | | to have your insurance professional |
| for residential real estate has begun to | | | | "walk" the property with you to point |
| cool, commercial real estate investment | | | | out potential hazards before they become |
| opportunities abound. Commercial | | | | law suits. |
| properties have additional risks that | | | | Hazard insurance provides protection in |
| need to be mitigated and in today's | | | | the event of damage from fire, |
| litigious society, it is important for | | | | accidents, theft, and vandalism. |
| investors to take the steps necessary to | | | | Depending upon where you live, you might |
| protect themselves and their | | | | want to look into adding protection from |
| investments. | | | | storms and natural disasters. All |
| As the housing market begins to cool | | | | owners of real estate should have this |
| off, the investment risk of real estate | | | | insurance and again, if a loan is |
| has increased somewhat. Residential and | | | | involved, the lender will require you to |
| commercial real estate investors can no | | | | purchase it and name them as an |
| longer rely on a continually increasing | | | | additional insured. |
| market to bail them out of mediocre or | | | | Environmental insurance is a new form of |
| bad purchases. The only real insurance | | | | risk management that is gaining in |
| you have here is to study investment | | | | popularity with lenders. Instead of |
| analysis further and to really check | | | | performing Phase 1 and Phase 2 |
| your market before committing funds to a | | | | environmental studies, more lenders are |
| transaction. | | | | opting for insurance against this type |
| There are other risks in commercial real | | | | of loss. Because lender liability is |
| estate that you can mitigate through | | | | limited in current law, the focus is on |
| third party insurance policies. The | | | | paying the outstanding loan balance or |
| most common form is title insurance. | | | | the cost of clean up, whichever is less. |
| Most real estate professionals recommend | | | | A word of caution here: Make the |
| that buyers obtain title insurance on | | | | lender get the insurance (you'll still |
| any property they purchase and if a loan | | | | have to pay for it) … it's not your |
| is involved, the lender will make it a | | | | job to understand the intricacies of |
| condition of obtaining the loan. The | | | | environmental pollution and its risks. |
| purpose of title insurance is to protect | | | | In addition to these basic forms of real |
| the buyer in the event that problems are | | | | estate insurance there are other types |
| found with the title after the close. | | | | of coverage that you may wish to |
| Even though all sales of real estate | | | | consider. For instance, those |
| include a title search, it is a good | | | | properties located in or near flood |
| idea for the buyer to purchase separate | | | | zones may wish to purchase flood |
| title insurance as an extra measure of | | | | insurance, while those in earthquake |
| protection against mistakes in the | | | | prone regions may want to consider the |
| search. This extra insurance will help | | | | purchase of additional earthquake |
| protect the buyer in the event of any | | | | insurance. And in the wake of 9/11, |
| undiscovered liens, disputes over | | | | there is even the opportunity to |
| property lines, or other matters | | | | purchase terrorism insurance! |
| affecting title. | | | | In the final analysis, each real estate |
| Another common, but important form of | | | | investor has to look at his or her own |
| insurance for investment property is | | | | level of risk tolerance and what might |
| liability insurance. This provides the | | | | actually affect the real estate |
| investor protection from liability in | | | | investment. From there, with the help |
| the event an individual is injured while | | | | of an experienced commercial hazard |
| on the property. It is all too common | | | | insurance broker, you can then purchase |
| for individual property owners to be | | | | the right mix of insurance needed to |
| sued for seemingly frivolous reasons, so | | | | adequately address and mitigate those |
| it is vital for all property owners to | | | | risks. |