I just spoke with a friend in Nevada. A couple years ago, he bought a new house and rented his old one to some tenants. The tenants wrecked the place, and it was also vandalized externally.
And it was serious damage. In total, the cost was going to run nearly $20,000 to correct the problems.
“No problem,” he thought. “I’ll call my insurance company to file a claim.”
This is when he learned a hard lesson: Owner-Occupant insurance and rental dwelling insurance are not the same thing. In fact, when the insurance company learned he’d turned his property into a rental, they not only refused his claim, but they cancelled his policy.
The problem is that this wasn’t “merely” a $20,000 mistake. He’d planned to use that money to fix the property up in order sell it, because he’s facing some financial pressure. Now, he’s unable to fix the property and probably won’t be able to sell it… and will soon face foreclosure.
Think of that: The wrong insurance policy leads to FORECLOSURE. It’s a harsh, but true, reality.
So if you’re a landlord, be sure to consult with your insurance agent to make sure you have the right coverage. It just might save you a foreclosure in the future.
Thank you for reading http://realestate.BryanEllis.com!
I am sure you think that is Obama’s fault.
Nope. I believe in individual responsibility. This guy got what he deserves, unfortunately. He made a mistake and is paying for it. That’s how things work in the real world. And the real world does not revolve around Obama. — Bryan Ellis
Thanks for the heads up/reminder. Hopefully the insurance company has already issued a refund of the worthless insurance premiums he paid to purchase a false sense of security.
It is all about doing due diligence. People don’t think to look at all aspect they tend to assume. When you assume it will always bite you in the end.
The policy he had purchased wasn’t wothless, I am sure if he read it he would have found it worked perfectly well for what it was written for. He also would have found that like most insurance policies he would be cancelled for violating the terms of the policy.
Like Bryan says check and then check again. If you change something call your agent and tell them what you are doing before you do it. Not only will they help you stay out of trouble they will most likely save you some money in the long run. It seems like common sense but it seems most of that has left the planet.
Chris B
Yep, insurance companies don’t make their money by moral practices. They make it in the fine print and the ability to interprit a claim in a way that benefits them and not the insured. Unfortunately, under the letter of the law, more often than not this is perfectly legal.
Think “Katrina.” Because of a technicality and the insurance companies interpritation of the cause of the damage to most of the homes, they avoided having to pay out billions in claims.
Good article, What many investors do not know is that there is also a contractor’s policy a investor can get when they are rehabbing a house. This policy will cover the house while it is being rehab and while it is being sold.