Life, health, disability, property insurance, risk assessment, and coverage strategies.
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Foundation terms you need to know first (15 terms)
Loss of income in real estate refers to a situation where an investor's expected rental revenue from a property is reduced or eliminated, often due to vacancies, tenant issues, or property damage.
Risk transfer is a strategy in real estate investing where the potential financial burden of a risk is shifted from the investor to another party, often through insurance policies or contractual agreements, to protect assets and limit liability.
Downside protection in real estate investing refers to strategies and measures taken to minimize potential financial losses or negative outcomes in an investment, safeguarding capital against adverse events.
Water damage refers to any destructive impact on a property caused by unwanted water, ranging from minor leaks to major flooding, leading to structural issues, mold, and significant repair costs for real estate investors.
Vacancy risk is the potential for a rental property to remain unoccupied for a period, leading to a loss of rental income and increased holding costs for the investor. It's a key factor in real estate investment analysis.
Complex strategies and professional concepts (4 terms)
Indexed Universal Life (IUL) is a type of permanent life insurance that offers a death benefit and a cash value component, where the cash value growth is linked to the performance of a market index, such as the S&P 500, typically with a floor and a cap on returns.
Counterparty risk is the risk that a party to a contractual agreement will fail to fulfill its obligations, potentially leading to financial loss for the other party. In real estate, this can arise from various stakeholders, including lenders, borrowers, tenants, or joint venture partners.
The Infinite Banking Concept (IBC) is a financial strategy where individuals or businesses use a specially designed participating whole life insurance policy to become their own bank, financing major purchases and investments, including real estate, with policy loans.
Environmental insurance provides coverage for liabilities and costs associated with pollution incidents, contamination, and environmental damage, crucial for real estate investors managing properties with potential environmental risks.
Actual Cash Value (ACV) is an insurance term referring to the cost to replace or repair damaged property, minus depreciation for age, wear, and tear. It represents the current value of an item at the time of loss.
Adjustable life insurance is a type of permanent life insurance that offers policyholders the flexibility to modify their death benefit, premium payments, and cash value accumulation to adapt to changing financial needs and life circumstances.
Asset protection through life insurance involves strategically using life insurance policies, particularly those with cash value, to shield wealth from creditors, lawsuits, and estate taxes, enhancing financial security for real estate investors.
Behavioral risk management in real estate involves identifying and mitigating the impact of psychological biases and irrational decision-making on investment outcomes, ensuring more disciplined and objective choices.
Calculated risk is an investment strategy where potential financial or strategic actions are taken after thoroughly assessing, quantifying, and developing mitigation strategies for all associated risks. It's an informed decision based on data and analysis, not a gamble.
Capital preservation is an investment objective focused on safeguarding the initial investment principal from loss, prioritizing risk minimization and stability over aggressive growth. It's a strategy to protect wealth, especially in volatile markets or for risk-averse investors.
Commercial General Liability (CGL) insurance protects real estate investors from financial losses due to third-party claims of bodily injury, property damage, and personal or advertising injury occurring on their commercial properties. It covers legal defense costs and damages up to policy limits.
Commercial Real Estate (CRE) risk assessment is the systematic process of identifying, analyzing, and evaluating potential threats and uncertainties that could impact the financial performance and value of a commercial property investment.
A contingency plan in real estate investing is a proactive strategy to prepare for unexpected events or challenges that could negatively impact an investment, ensuring business continuity and financial protection.
Contingency planning in real estate involves identifying potential risks and unexpected events, then developing proactive strategies and setting aside resources to mitigate their financial and operational impact on an investment.
Counterparty risk is the risk that a party to a contractual agreement will fail to fulfill its obligations, potentially leading to financial loss for the other party. In real estate, this can arise from various stakeholders, including lenders, borrowers, tenants, or joint venture partners.
A death benefit is the sum of money paid to the designated beneficiary or beneficiaries upon the death of an insured person, typically from a life insurance policy. It provides financial protection to loved ones.
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