The second guarantee one should evaluate well is the loss of income. Indeed, following a disaster, your buildings could perhaps not be able any more to receive your tenants; so, no income will be created. It will however be necessary for you to continue to face the fixed expenditures such as refunding of the mortgage, payment of the taxes or others. To determine the amount of insurance necessary, you should ask yourself the following question: If my building were to be a total loss, how long, at the most, would it take to rebuild the whole? And also envisage a certain additional time to re-let the whole of the buildings. This duration of interruption in months, multiplied by the monthly rental income, represents the probable loss of income and determines to some extent the amount of insurance necessary.
Note: this guarantee is perhaps optional according to the insurers. For
The last guarantee for which we want to sensitize you is the amount of insurance for public liability. The majority of the insurers offer limits of 1 or 2 basic millions of $ with their contract. However, higher amounts are often to be considered. When one speaks about this protection, people often think of the bodily harm that a tenant or a visitor could undergo. One thinks of falls on the ice outside or on a floor or a soaked staircase etc…It is however necessary to evaluate beyond only the potential wounds. The whole of the goods belonging to each tenant is also a possible loss of civil liability.
Let us take, for example, a fire in a building which would destroy everything. The cause of the fire reveals, after investigation, a certain negligence of the owner who would have left flammable elements in the room where the heating elements are located or the principal entry for electrical power. Following this fire, all the tenants or their insurers will have the right to claim the loss of the goods of each one of them. If the building comprised 24 apartments, and envisaging a claim of approximately 50,000 $ per apartment, you can calculate basically a loss in claims against the owner of 1,200,000$.
Moreover, imagine a tenant on the third floor trapped by the flames with no other choice than to jump to the ground from the balcony and that the latter is wounded in a rather serious way and that certain permanent wounds result from this. The total claim will then be more than 2 million $. It is up to you to choose well your amount of insurance for this protection. Often, to pass from 2 to 5 million $ of amount of insurance does not necessarily represent a high extra premium.
It is up to you now to act in order to ensure that you determine well your amounts of insurance. We will return to you later-on with another article to speak to you about the guarantees available and their advantages.