By Rick Abell
Did you know that you are required to report a loss at your property to your insurance carrier in a timely fashion?
Did you also know that not reporting to the carrier in a timely fashion could result in the carrier denying coverage for your loss?
Why do insurance policies require you to report damage in a timely fashion? Your insurance carrier offers coverage with the understanding that you are looking to protect your investment. As such, there are requirements under the policy that commit you to protecting the property and when damage occurs, to mitigate those damages.
You are expected to know the condition of your investment property. The insurance carrier provides a reasonable amount of time to find, mitigate and report damage, usually 60 days. A lot can happen in just a few hours, so 60 days is a very reasonable time frame.
Regular inspection of your property helps you find issues that can be fixed before more serious and costly repairs are needed. Are your properties checked on a regular basis? Do you leave it to chance to find damage? If you do, you could be jeopardizing your coverage.
Potential cost of late reporting a loss: NO coverage for an otherwise covered peril.
Yes, you heard us correctly, the most painful thing about not reporting a loss in a timely manner is that you may end up negating coverage that would have been originally available to you.
- Check on properties immediately after a weather event such as hail storms, power outages or extreme cold.
- Receiving rent in a routine and timely fashion is usually a good indicator that your house remains occupied.
- If rent is not received according to the terms of the lease, a drive-by inspection should be performed, just to make sure the property is still occupied.
- If the tenant realizes they can’t make the rent payment, they may move out suddenly, often leaving the property unsecured.
- If eviction proceedings are started, you will want to perform drive-by inspections more often.
- Quarterly Drive-by Inspections. A drive-by inspection is a visual check on the property’s exterior condition, usually not even leaving your car. What are you looking for?
- Is the lawn in good order? (Grass cut, shrubs trimmed, trash picked-up.)
- Is there mail flowing out of the mailbox?
- Is the property secured or are there broken windows? Is the front or back door open left “swinging in the wind?”
- Is the garage door down? Has it been left open?
- Are the expected cars in the driveway? Are there too many cars in the drive, the street, the front or back yards?
- Does there seem to be an average amount of foot traffic or is there more activity around the house than anticipated?
- Are lights on during the early morning or evening hours? (An indicator that power is on.)
- Is there water gushing from the house or are ice and icicles present?
- Is the house still standing or is it now burned out and abandoned?
- 2 Annual Walk-Through Inspections (scheduled with the tenant).
- A thorough inspection of the house looking for wear-and-tear and violations of any safety measures.
- A good time to check the batteries in smoke alarms and check for build-up in dryer vents and condition of HVAC filters.
- Check for leaks in the ceiling, kitchen and bathroom fixtures and in the basement.
VACANT or RENOVATION PROPERTIES:
- The same inspections as occupied properties, but on a more frequent basis.
If you don’t expect to maintain your investment by checking on it frequently and making any necessary repairs, real estate investing may not be for you. If you hired a Property Manager, make sure they are collecting rent on time and performing at least two annual walk-through inspections and routine drive-by inspections. Sample checklists to document each inspection can be found in our Resource Center.