Investment Property Insurance Questions You Should Ask Your Agent

Real estate investors that do well are smart folks, but it can be hard for smart people to admit they aren't experts at everything. Many of us have successful careers outside of investing. Maybe you're a CPA or a neurosurgeon, or an attorney like myself. But smart people like ourselves need to be mindful that we are also wise. Wisdom is knowing that there are things you don't know.

And what do the wise among us do when we don't know something? We ask questions! Insurance is vital, and typically a legal requirement for your investment properties. Insurance alone is not an advisable strategy for asset protection purposes. At Royal Legal Solutions we highly recommend insuring your properties as your first line of defense.

Question 1:  What Types of Policies Are Available To Me?

Typically, you'll find policies along a spectrum of Basic, Broad, Specified, and Comprehensive. The first is exactly what it sounds like: the bare minimum. Comprehensive is the opposite end of the extreme, and the most all-inclusive kind of policy you can acquire. A good starting point is to write down what you have; i.e. assets, debts, dependents, monthly income, monthly expenses, and how you make a living. This way you can formulate a plan for what coverages you will need and work from there.

Question 2: Can You Please Explain My Policy And What It Covers?

This is fairly straightforward. You may also take this opportunity to ask what other types of investment property insurance the home already has (fire, etc.) to get the best idea of your needs.

There's a second part to this question: you will also want to ask what your policy does NOT cover. Some policies cover slip-and-fall accidents, and some don't. Many investors need this coverage, especially those who flip or rehab homes. Think about it: with all the contractors,  laborers, and both prospective and future tenants coming through the property, you can't risk not having your backside covered. Asking what isn't covered will help you make the most informed decision possible.

One major concern you should know about your policy is whether it covers the loss of rent. Landlords can face this in situations as extreme as natural disasters (just ask the landlords who had to rebuild after Hurricane Sandy) or as mundane as a few teenagers armed with spray paint defacing your property. (maybe also add about short-term rentals, where damage to the property or furnishings in the property cause a loss of revenue? Assess your risks alongside your agent, but remember insurance is cheap when you think in terms of loss so investors who can afford it should take advantage.

Question 3: What Information Do You Need For An Investment Property Insurance Quote?

This may seem obvious, but the details of your situation will help the agent get you the most appropriate and accurate quote for your needs. Here are some typical things you will have to provide:

  • Identifying information. Full Name, D.O.B., Social Security Number, Drivers License Number
  • Special Circumstances. These include details about you and your property.  If you aren't certain of the home's condition, or what remodeling you may need to do, your agent can help.  Agents can even assist you in unearthing records of previous repairs to the home--a move that will save you time and money if you plan to force appreciation on your rental property.

Question 4: What Is My Property's True Replacement Cost?

TRC is different from the value of your home but critical for real estate insurance purposes. It's usually measured in square footage, and a good agent will work with you to determine your need. Feel free to shop around with various agents to ensure you're getting the best, honest deal. There are over 4000 different factors that go into determining the assessed value of a property.

Final Notes: The More You Know, The Better Off You'll Be

You want an agent who is both transparent and able to answer all of these questions. You can start by researching reputable agents online. If an agent won't answer these questions, that's a giant red flag. Move on.

Still stuck? We now have an in-house insurance agent on staff to assist real estate investors. Together we can streamline coverage through the policies we offer to ensure that you are protected and that your loved ones are cared for in the event something unforeseen occurs. We offer a single point of contact for all of your policies including auto insurance, property insurance, and life insurance. To get started, take our Insurance Quiz and book your free consultation. You've got nothing to lose in requesting a quote and everything to gain if we can save you money.

Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.

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