Amount Of Liability Insurance?
As we all know, we purchase insurance for our buildings based on how much risk we want to assume. I do know that one can be over or under insured.
What are some of your opinions on amounts liability coverage you carry on specific properties?
Myself, I have found from asking a few insurance brokers that most investors carry a 300k fire and liability policy for smaller 2-6 unit buildings. A smaller percentage request 500k or 1mil fire and liability coverage for these same buildings.
What are some of your opinions on this issue?
Finn,
Right. In my case, the building is worth less that what it would cost to replace.
Gino,
Do you mean "liability" coverage at either 300k, 500k, or $1m? "Fire and liability" are separate issues. In other words the amount of coverage you carry on the property itself is separate and a result of many things:
Reconstruction cost versus market vs. actual ccash value is one issue. Your ultimate "exit" strategy on the property if a loss occurs. In other words, would you want to rebuild, or would you want to pay off any mortgages, take the difference that the policy would pay (based upon many factors) and go buy another property, etc...
Liability coverage choices are complex in and of themselves. "How much is enough?" is tough to answer. How much do you have to protect? How much asset protection strategezation have you acccomplished (we all should have an estate or asset potection advisor help us with this)? Remember liability insurance is not the strategy, it is part of it.
Build the castle walls around your assets with proper advice and planning through entity selection and creation, and let insurance serve as the guards in the watchtower. Remember , too, that asset protection, estate planning, financial planning, and even tax planning, should work with one another and not be segregated.
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Best regards,
Tim[ Edited by norrist on Date 10/06/2007 ]
It seemed like the post was leading into discussions of liability and "recommendations", but then segued into property coverage...
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ITV, or Insurance To Value, is so prevalent today with insurers that co-insurance penalties are rare occurences these days...
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