Apartment Building Insurance in San Diego: Protect Your Investment Property From Financial Pitfalls

Property insurance

Owning an apartment building entails considerable investment and if an unpredicted accident damages your property or the furnishings, you will suffer huge financial loss, which is why you should be adequately covered. Property insurance includes a combination of policies that serve to protect you in case physical structure of the building is damaged due to unexpected hazards. Apart from the main building, you most likely have additional permanent fixtures or equipment on your property (garage, storage facilities, swimming pools, signs, fences, etc.), and they are also included in this insurance. Covered perils include:

• Fire and smoke damage
• Water damage
• Windstorm, wind, lightning, and hail damage
• Vandalism & theft
• Explosions
• Aircraft & vehicle crashes

When choosing property insurance for your investment property, you will have to decide whether you want to have replacement cost or actual cash value coverage.

• Replacement cost – is based on replacement values and cover the expenses of repairing or replacing damaged property.
• Actual cash value – pays for the replacement cost minus depreciation

If you own a building in flood or earthquake prone area like San Diego, you may need extra coverages because standard polices do not cover these natural disasters. Earth-movement related disasters (mudflow, mudslide, debris flow, etc.) are not covered either, so you should consider purchasing these endorsements to have full coverage. Similarly, consider getting mold coverage if you are near water bodies. Note that flood endorsements are typically required by lenders.

General liability insurance

General liability insurance covers a wide range of liability exposures. It usually includes protection from financial losses if you, your employees, or your services are found liable for causing injuries or property damage. It covers all of the following:

• Third party bodily injury claims
• Third party property damage claims
• Medical expenses, hospital bills, ambulance fees
• Advertising injury
• Legal costs, lawyer fees, judgments and settlements

Commercial umbrella insurance

Commercial umbrella safeguards your investment building by increasing liability limits beyond primary policy limits. It acts as an additional layer of protection and supplements standard policy with limits from $1 million to $10 million or more. To determine the optimal amount of coverage, it is best to consult with insurance agent.

Umbrella insurance covers:

• Property damage
• Liability claims (negligence in safety and security matters)
• Tenants injuries
• Legal and lawyer fees; medical bills

Business owner’s policy (BOP)

If you own a smaller size complex, with less than 100 occupants, you may benefit best from Business Owner’s Policy, also referred to as BOP. Owners of larger condo buildings should opt for Commercial property insurance instead.

Business owner’s policy combines three major coverages into one, and is typically more affordable than purchasing all three separately.

• General liability
• Property damage (with perils)
• Business interruption

Note, however, that it does not cover things like worker’s compensation or endorsements for natural hazards like earthquakes and floods.

Employment practices liability insurance (EPLI)

If you have employees, you should have Employment practices liability coverage (EPLI). It protects you from a wide range of employee and third-party claims, and provides critical financial safety net in costly lawsuits.

EPLI covers claims of:

• Discrimination (age, race, gender, disability, etc.)
• Harassment
• Wage and hour violations
• Wrongful discipline, termination, or demotion
• Employment contract breach
• Privacy violation
• Emotional and mental distress

Lawsuits related to these matters can lasts for years before they are resolved and they typically cost a lot of money. With this in mind, it would be wise to include this coverage. Peace of mind will be well worth the extra cost.

Business interruption

Business interruption insurance (BII), also referred to as ‘business income coverage (BIC)’ serves to protect you against accidents that can cause you to lose your income due to inability to continue with daily operations as usual. With this coverage, you can be reimbursed for some (or all time) time it takes to repair issues that cause you to lose money. You could also consider Extended business income which replaces your income past the restoration point. This endorsement allows you to  have income coverage until you build back your business.

It helps replace lost income and helps pay for:

• Lost income
• Loans
• Mortgage, tax, rent payments
• Wages and payrolls

Builder’s risk (Building lifecycle)

Obtain this coverage to be protected during building construction or renovation. Average cost is between 1% and 5% of the total renovation (or construction) budget, but you can also supplement it with other endorsements (trees and plants, pollutant clen up, or equipment breakdown). Ensure you include your general contractor, subcontractors, and other people on your policy as insureds.

This insurance covers:

• Weather related accidents (hail, lightning, hurricane)
• Vandalism and theft of materials, supplies, or equipment
• Taxes and various permit fees
• Debris removal
• Business income / rental value

Flood insurance

Traditional policies don’t cover floods, so it’s good to purchase this policy separately. Flood coverages are typically offered through National Flood Insurance Program (NFIP), an affordable program managed by the FEMA and intended to help building owners recover faster after storm surges, river flooding, or floods after wild fires.

Workers’ compensation

If you employ workers, you have to acquire Workers compensation coverage . It is required by law in most states; plus, it shields you from potential losses with advanced claims and risk management services. It helps pay for wages, medical expenses, disability benefits, retraining, or funeral expenses.

Ordinance and law endorsements

This endorsement compensates you for the expenses of building or repairing your property according to current building codes and is valuable coverage for anyone who owns an older property. For instance, if your 60-year-old townhouse burns down in fire, this endorsement would reimburse you for the cost of rebuilding it under current building codes.

The coverage has three parts, which can be purchased individually or together:

• Undamaged portion – In certain instances, complying with laws and regulations will mean that you may need to replace the parts that were not originally damaged. Let’s say the hurricane damages 40% of your structure, you may need to replace the whole building. Property insurance will compensate for the 40%, while Ordinance and Law compensate for the whole structure.
• Demolition – As in the previous example, the same applies for demolitions. This coverage would compensate you for the entire demolition, partial one.
• Increased construction expenses – Often rebuilding according to new codes costs more money than originally planned, but instead of paying for it by yourself, this coverage kicks in.