Residential Realty Risk Prevention & Best Practices
As a property manager or investor in residential realty, you’re exposed to various risks that could lead to significant losses. From natural disasters to tenant disputes, you need to be prepared for any eventuality. That’s why having business insurance is essential. Our advisors work diligently to keep up with what the insurance markets are doing regarding capacity and rating. At Harvard Western Insurance, our advisors often collaborate with the insurance markets to find ways for condo corporations to combat risks and potentially avoid rate increases.
Before we delve into the importance of business insurance, it’s essential to understand the risks involved in residential realty. One of the most significant risks is natural disasters, such as floods and water damage. These events can cause significant damage to your property and lead to lost rental income. Additionally, tenant injuries can result in lawsuits that could cost you a lot of money.
Residential Realty Market Condition
The insurance markets continue to take aggressive steps toward addressing the residential realty market’s adverse loss experience. Residential reality risks continue to suffer ever-increasing losses, with the primary type being water-related. The insurance marketplace is implementing two strategies to bring more stability to the market hopefully. These strategies are to increase premiums and limit the value insured’s capacity. If insurance companies did not implement these strategies, they would have little option other than to stop insuring residential realty altogether.
The insurance markets are also taking more decisive action on high-value condos with numerous units. Typically these properties have a higher likelihood of loss, and when one does occur, the value of the loss can be more substantial as more units may be affected. Condos continue to have the highest probability of failure, with losses affecting over 30% of properties.
What Can Condo Corporations Do?
We recommend that condo corporations invest in effective loss prevention measures, respond to previous risk improvement recommendations, and establish a water damage mitigation plan. We’ve observed that improved general maintenance could have eliminated or reduced many losses. Typically, bylaws transfer ongoing maintenance responsibility to the unit owner, which leaves the condo corporation at risk. Proactive action by condo corporations has proven to reduce the likelihood and severity of losses. Many plumbing and heating companies provide condo corporations with loss prevention inspections and reports.
With the help of our partners at Wawanesa Insurance, we have compiled the following best practices and loss control suggestions for condo corporations. Please see the below pdf for a comprehensive list of areas and suggestions to help with risk management.
Business Insurance for Property Managers
If you’re a property manager, you have unique risks that require specialized insurance coverage. For example, you may be held liable for the actions of your employees, such as maintenance workers and security personnel. You may also be responsible for managing multiple properties, each with unique risks.
That’s why it’s essential to have a comprehensive insurance policy that covers all your properties and employees. A qualified insurance agent can help you identify the risks specific to your business and provide you with the coverage you need.
Liability Insurance: Protection Against Claims and Lawsuits
Liability insurance is another essential type of business insurance for residential realty. It protects you against claims and lawsuits that may arise due to injuries or damage caused by your property. For example, if a tenant slips and falls on your property, they may file a lawsuit against you for medical expenses and lost wages.
Liability insurance can cover the cost of legal fees and damages awarded in such cases. While liability insurance is essential for mitigating risks, there are other steps you can take to protect your property. One of the most important is conducting regular property inspections to identify potential hazards. Additionally, you should ensure that your property is up to code and that all safety features are in place.
Rental Income Coverage: Importance and Benefits
When you invest in residential realty, your primary goal is to generate rental income. However, what happens if your property becomes uninhabitable due to damage from a natural disaster or other event? That’s where rental income coverage comes in. This insurance protects your rental income if your property becomes uninhabitable due to damage caused by an insured peril.
One of the main benefits of rental income coverage is that it provides a source of income even when your property is unoccupied due to an insured claim making the premise unliveable.
Whether you’re an investor or property manager, you must protect yourself against natural disasters and other hazards. You can protect your rental income and limit your liability exposure with the right insurance coverage. Remember to conduct regular inspections, screen potential tenants, and consult a qualified insurance advisor to ensure you have the necessary coverage.
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