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.
Refinancing risk is the potential for an investor to be unable to refinance existing debt on favorable terms, or at all, when the current loan matures or a new financing need arises. This risk can lead to increased costs, reduced cash flow, or even foreclosure.
Replacement cost is the estimated expense to construct a new property with similar utility and function to an existing one, using current materials, labor, and construction standards, excluding the value of the land.
Risk management in real estate is the systematic process of identifying, assessing, and controlling potential threats to an investor's capital and returns, ensuring long-term asset protection and profitability.
Risk tolerance is an individual's psychological willingness and financial ability to take on risk in pursuit of investment returns, dictating comfortable levels of market fluctuation and potential loss.
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.
Short-Term Rental (STR) insurance is a specialized policy designed to protect property owners who rent out their residential properties for short durations, typically less than 30 days, covering unique risks like property damage, liability, and loss of income associated with commercial use.
Tax-deferred growth in life insurance refers to the accumulation of cash value within a permanent life insurance policy, where earnings grow without being taxed annually until withdrawn. This allows for compounding growth over time, offering a strategic financial tool for investors seeking liquidity and tax advantages.
Term life insurance provides coverage for a specific period, or 'term,' and pays a death benefit to your beneficiaries if you pass away during that time, offering financial protection without a cash value component.
Title insurance protects real estate owners and lenders against financial loss from defects in a property's title, ensuring clear ownership and safeguarding against past claims.
An Umbrella Insurance Policy provides additional liability coverage beyond the limits of standard insurance policies, protecting personal assets from large claims and lawsuits.
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.
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.
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