Insurance agents are an important part of your real estate investing dream team because they help you secure the right coverage to protect your investment.
While they often come into play closer to the end of your property purchase, selecting a good insurance agent early in the process is key to making sure your assets are protected from day one and can help you with having appropriate numbers when analyzing potential deals.
What Do They Do?
Insurance agents work to find the best coverage to protect your property from risks such as damage, liability claims, and natural disasters.
As a real estate investor, you need policies tailored to rental properties, which differ from standard homeowner policies.
In addition to property coverage, they may also recommend umbrella policies to protect your assets in general—regardless of whether you own properties.
Here’s what an insurance agent typically handles:
- Evaluating Property Risks – They assess factors like location, property type, and usage to recommend the right insurance policies.
- Recommending Insurance Policies – They guide you through options such as landlord insurance, liability coverage, and umbrella policies, ensuring your assets are adequately protected.
- Providing Quotes – They offer quotes based on the property and coverage you need. These quotes will help you plan for your deal analysis and give you realistic numbers to factor into your cash flow projections. It is not about getting the lowest rate. Sometimes it makes sense to pay a little more to get better coverage.
- Assisting with Claims – If your property suffers damage, the insurance agent helps you file claims and ensures you receive the compensation needed to repair or replace the property.
Additionally, your mortgage broker can be a great source for insurance agent referrals in addition to your real estate agent. Since your mortgage broker regularly sees a variety of insurance quotes when helping clients close deals, they may know which agents consistently provide low rates. While you need to compare the actual coverage provided for those rates, this can give you a good starting point. A mortgage broker who takes the time to look at insurance policies is a valuable resource when selecting an insurance agent.
When Do You Involve Them?
You’ll typically need to secure an insurance policy once you’re under contract and preparing to close.
Lenders will require proof of insurance before they fund the loan, but you won’t need to purchase the policy until the property is officially yours—usually at closing.
However, it’s smart to reach out to an insurance agent earlier, before you start analyzing deals.
By getting a quote for a typical property you’re considering, you can use realistic insurance costs in your deal analysis. This gives you a clearer picture of how the property will perform financially. You don’t need to call your agent for every potential deal—just adjust your analysis up or down depending on the price of the property you’re analyzed based on the initial quote.
You can get a firmer insurance quote—and verify your assumptions—when you get more serious about a particular property.
For investors who want broader protection for their assets, it might also be worth considering umbrella insurance even before purchasing any property. Umbrella policies provide higher levels of liability protection beyond what your standard policies offer. Depending on your financial situation, you might benefit from an umbrella policy even before owning rental properties, and your insurance agent, CPA, and attorney can help you decide if this makes sense for your situation.
In general, if you have assets to lose, then an umbrella policy to protect those assets may make sense.
Why Are They Important?
Insurance is a foundational component of your asset protection plan as a real estate investor.
The right coverage can protect you from unexpected costs due to natural disasters, fires, or liability claims.
Without proper insurance, a single incident could result in significant financial loss.
Here’s why having a good insurance agent on your dream team is critical:
- Property Protection – They ensure you have the appropriate coverage for physical damage and repairs.
- Liability Coverage – They recommend liability policies to protect you from lawsuits and other claims.
- Umbrella Protection – Umbrella policies extend your coverage, protecting you and your assets beyond the limits of your specific automobile and property policies.
Other Items of Note
- Umbrella Policies – Umbrella policies are designed to protect your personal assets from higher-level liability risks, such as lawsuits that exceed the limits of your existing coverage for your automobile and property policies.
- Working with Your Team – Insurance should be considered in the broader context of your asset protection strategy. Work with your insurance agent, CPA, and attorney to ensure that all parts of your financial and legal protection are aligned and provide comprehensive coverage.