Fires are among the most costly perils in the home insurance business. When you take out a fire insurance policy on a property you own within a Real Estate IRA, you are protecting yourself against a hazard that cost insurance companies, on average, nearly $40,000 per claim.
Sure, none of us like paying insurance premiums. But when you look at the potential costs of a fire if your Real Estate IRA owned properties aren’t insured, those premiums begin looking a lot more reasonable.
Assess smoke damage. Just because your Real Estate IRA property didn’t burn doesn’t mean it wasn’t damaged. Smoke can cause damage to a home, resulting in a claim against your fire insurance policy. You may have to replace drywall, carpeting, wallpaper, drapes, do a major paint job, and undertake a number of other repairs just from smoke damage alone. Be sure to document this damage thoroughly.
Further, cleaning your own home after a fire or major smoke event is unsafe. You will likely need professional cleaning and mitigation. Professional clean-up firms bring special protective equipment, like hepafilter masks and special vacuums to protect their workers from harmful fumes, soot and other hazardous particulates. So ensure you are prepared to support your claim for compensation for these significant expenses.
Furthermore, some do-it-yourself repair attempts backfire, making stains and other damage worse, not better!
Document early and document everything. At a minimum, keep records of the following:
- Date of damage or loss
- Type of damage (smoke, flame, water damage from firefighting efforts, etc.)
- Description of damage.
- Injuries, if any
- Identities of all parties involved
- Condition of the Real Estate IRA property or home at the time of the fire
- Description of any temporary repairs you made
- Cost of temporary repairs (include estimates and receipts
- Police or fire department reports
- Insurance claim ID number
- Insurance company authorizations for any temporary repairs you do
Additionally, it may be a good idea to insist the tenants living in your Real Estate IRA own renter’s insurance. While your insurance policies will cover damage to your property, including interior and exterior damage, it won’t cover your tenants’ belongings. Furthermore, since renter’s insurance also has liability protection for your tenants, it helps protect you against any damages your tenants may cause, such as accidental kitchen fires, etc.
Some additional tips:
- Don’t throw away damaged property before the insurance adjustor sees it.
- Hire only licensed and ensured contractors to do repairs. Ask for certificates of insurance before starting any work.
- Don’t sign documents allowing the contractor to collect payments directly from the insurance company. While the practice is legal, in reality the consumer almost never benefits.
- Consider filing claims for loss of use of your property, or loss of rental income while the Real Estate IRA property is uninhabitable. Your landlord insurance policy may provide coverage against this loss.
- Ask for an advance against your final insurance claim. This advance can help you pay for needed mitigations and to help prevent further damage, such as wet rot and mold from accumulated water from firefighting attempts.