How to invest in a home safely and securely to ensure you and your renters are protected from catastrophe.
When making the choice to purchase a home, it goes without saying that it can be somewhat of a juggling act trying to organize the various elements that go into your new investment whether it’s finding a realtor, a location, handling buyers or even squashing pest concerns. One of the most critical aspects of homebuying that consistently goes overlooked, however, is your homeowner’s insurance.
The fine print of your insurance policy is something nobody wants to tediously read through, and for that reason very few buyers ever do. However, what many do not realize is that the nuances of your policy are what can make or break you in the case of a natural disaster, whether it’s a thunderstorm, hail, or a fire.
In Florida, for instance, a state that is the go-to spot for investors trying to rent out their properties, a natural disaster that is less well known but equally as catastrophic is sinkholes. Sinkholes occur when rainwater sinks down through the surface soil and reaches sandstone or limestone which dissolve over time. Eventually, the land can’t support its own weight and collapses, resulting in massive cavities that can be up to 2,000 feet in length.
Despite their prevalence in the state, Florida law has incredibly specific criteria to cover “catastrophic ground collapse,” and insurance coverage is not mandatory for sinkholes that fall outside of those standards. The four criteria that are defined by the government include: the abrupt collapse of the ground, a visible depression, damage to the foundation of the building, and the property determined uninhabitable.
Tennessee protects consumers buying personal residences with a form known as Tennessee Residential Property Condition Disclosure. As of July 1, 2015, a new question focused on sinkholes was added to the document. The Tennessee Residential Property Disclosure Act (which the form adheres to) requires most sellers to complete the six-page document and present it to the buyer(s) before the acceptance of a purchase contract. Sellers who have not resided on the property at any time during the previous three years are exempt from this notification. The intent of this disclosure is to communicate any known material defects in the property.
Sinkholes are very common throughout Middle and East Tennessee. In fact, Tennessee is ranked among the top five states with the highest risk for sinkholes. Gaining special coverage for sinkholes that aren’t covered often means prohibitively expensive premiums for property owners to obtain. For this reason, before purchasing a property in Tennessee, it is important to ensure that your seller is being completely transparent regarding sinkholes in the area. Homebuyers can even go so far as to search for public records in their county for sinkhole fillings related to the property.
Fires are another common natural disaster that tears apart properties. Even outside of The Sunshine State, there are 370,000 house fires every year around the country that cause approximately 7 billion dollars’ worth of damage. It’s easy to say that these situations will never affect you or your home, but in case it does, homeowner’s insurance is your personal protection if a loss occurs.
For this reason, it is essential to look at your insurance from a recovery perspective rather than a cost perspective. Something that could be cheaper in the short run could have massive future costs for you and your family in the case of an emergency. Your insurance agent is key to understanding your policy, and before you buy your coverage, ensure that he or she outlines specifically to you what is excluded from your plan. Don’t be afraid to shop around in order to find the best insurance policy for you.
Once you’re confident in your insurance plan and are comfortable that you have protection from a natural disaster, there are other things to consider in order to ensure that, in the case of a claim, you are not denied. Primarily, video taping throughout your property is something that is usually not considered, but in the case of a disaster it greatly expedites the recovery process in terms of remembering what you had and what was lost in every room.
It is important to make sure your property is being maintained in order to avoid being turned down by your insurance company if something goes awry. Claims should also be filed in a timely manner, and it’s critical to consider that high-end items may not be included in your plan without special coverage.