Sad as it may be, anyone can be sued anytime, anywhere for anything! Hey, it’s the American way! Naturally, landlords and property owners fall smack-dab in the middle of this Wild West, shoot ‘em up free for all! The big question for us hard-working landlords and housing providers is: What can we do to protect ourselves?
If you operate real estate and manage the tenants who live there, your first line of defense will always be your insurance policy. Don’t confuse corporations, LLC’s, trusts or hiding on some far away island with the protection you need. When you own mortgaged properties and you have rental customers (aka), tenants living on your properties – you must have adequate insurance to protect yourself from losses. The only thing we need to discuss now is what kind.
Basically property owners (investors) need two kinds of insurance! They need property insurance (a fire policy) and they need liability insurance, which protects against personal accidents and injuries that may occur. I call this the people insurance! Liability insurance for investment real estate owners should provide protection for two different kinds of exposure. The first would be protection for accidents at the property. For example, say the bathroom floor falls through with the tenant standing on it, causing a personal injury.
The second kind of liability for investors is what I would call the imploding liability. It’s a risk for owners but has nothing to do with the property itself. In this situation, the property doesn’t cause the problem, yet the owners and his real estate holdings will be exposed to a loss just the same! Here’s an example of what I mean. Let’s say your handyman worker has just purchased a new toilet plunger at Scotty’s Building Supply and while driving to your duplex loses control of his VW bus and steers right through the middle of a troop of Girl Scouts selling their cookies on the sidewalk. Obviously, the property had nothing to do with this accident; yeto the liability will be tied to the owner and his real estate through the actions of the handyman! Naturally, you as the property owner-employer will be held responsible. You’ll need lots of insurance to pay for the cookies, believe me!