Investor Property Insurance

Insurance for Property Investors: Costs, Benefits, & Who Needs It

Getting the right insurance is a smart idea if you invest in real estate.

Investor property insurance is liability insurance that protects you in the case of accidents, damages, or lawsuits.

When choosing the right property investment insurance coverage, several factors must be considered before purchasing. 

What’s the best real estate investment insurance for you? 

Here’s everything you should know about insurance for property investors. 

What is Investor Property Insurance?

Three small grey brick houses.

Real estate insurance is the insurance of property, land, and buildings. This special type of coverage protects property owners who lease or rent building space used for offices, service businesses, and retail stores

Often, real estate investment insurance includes replacement insurance terms for reconstruction costs of repairing or rebuilding real estate that is damaged. 

Furthermore, real estate insurance covers:

  • Liability costs
  • Property damage
  • Loss of income

Whether you are renting your investment property, vacation home, or house, rental property insurance is an important protection against the potential financial risk associated with renters living on your residential property.

How Much Does Realtor Insurance Cost?

Property investor insurance is typically 20-30% more expensive than homeowners’ insurance because the insurers consider these properties a business. 

An average homeowners policy is about $1,249 per year. This means that if you add 25% to the aforementioned price, the average premium goes up to $1,561 per year. 

Some of the factors that affect the calculation of premiums are:

  • A liability insurance policy that safeguards an investor against personal lawsuits
  • Dealing with a business rather than a personal property
  • Higher chance of default on an investment property compared to a primary residence
  • Protection against loss of profit

Read more: Guide to Umbrella Insurance for Rental Properties

How to Lower the Costs of Investor Property Insurance

There are several ways that can help you lower the costs of investor property insurance, including:

  • Keeping the building and the surrounding area in good condition
  • Applying safety measures to your property (smoke alarms, security cameras)
  • Raising the deductible

How Does Investor Property Insurance Work?

The process of filing a real estate insurance property is similar to filing a homeowners insurance claim. First, you need to contact your insurance company. The insurer will ask you to fill out a claims form to describe what happened, and then the insurance company decides on a claim payout.

Are you a landlord? Read more about landlord insurance.

Why Do Insurance Companies Invest in Real Estate?

Insurers and reinsurers have searched for the latest methods to keep their investment returns and reduce risk by accommodating new classes of assets. Many insurance companies have focused on investing in real estate, including direct and indirect debt. They create custom real estate investor insurance for a purchaser or owner of the assets. Investment-grade real estate debt is appealing:

  • Bigger recovery rates compared to corporate bonds
  • Bigger rates of return compared to public debt
  • Bigger margins and smaller loan-to-value levels compared to the pre-Global Financial Crisis

Insurance underwriters do not directly invest in real estate. Instead, they invest in real estate investors and their property portfolios. Typically, an investor and his partners would cover their real estate investment risks with adequate coverage as well as additional insurance in the form of riders.

Insurance companies also have limits for property coverage. They impose coverage limits for a given area. This decreases potential losses when an area incurs flood and fire damages. In the same manner, real estate investors buy insurance from different companies if their portfolio consists of adjacent properties or clustered within an area.

Investor Property Insurance Coverage Limits

The insurance on investment property coverage limit is $10 million per location, while the general liability limit goes up to $1 or $2 million. In these cases, the minimum premium is $2,500, while the minimum deductible varies depending on the policy. 

Investor Property Insurance Submission Requirements

The first requirement includes forms for submission that are available upon request to Program Administrator. The other involves additional information about privacy protection, sprinklers, and alarms at the locations. 

What Type of Insurance Do I Need for a Rental Property?

Real estate investors face financial risks from circumstances that are way beyond their control, including property loss caused by liability claims, flood, wind, or fire. Here are different types of insurance programs to choose from:

  1. Single and Multifamily Insurance: Some insurers offer multiple property programs, where investors who own 10 or more locations of single or multifamily properties can be eligible. The program lets you add brand new properties in the convenience of a simple phone call – no application needed. It can also accommodate government-subsidized properties, market rents, buildings under renovation, mixed-use real estate properties, vacant land, and vacant buildings.
  2. Apartment Building Insurance: This insurance program is a great option for investors with individual apartment buildings and huge apartment complexes. For those with more units, discounted premiums are available. This insurance program offers vacant policies for vacant buildings and builders’ risk policies for buildings that are under major renovations.
  3. Commercial Real Estate Insurance: This insurance program provides quotes from an exhaustive selection of insurance coverage for all kinds of commercial real estate. Real estate investing with partners would require comprehensive insurance coverage, including those above. These can be communicated with the insurer by phone, and the amendments are added automatically.

Who Needs Investor Property Insurance?

Investor property insurance is most suitable for landlords renting their property. Investor property insurance isn’t mandatory, but landlords can benefit from it both short- and long-term. There are many events in which this policy can help, from natural disasters to lawsuits. Landlords who have property insurance for investors can remain calm because they know they are covered in these situations. 

Benefits of Investor Property Insurance: What Does it Cover?

The insurance coverage is different from insurer to insurer. Still, the policies will typically cover the structure or dwelling of your apartment complex or condo unit, your personal belongings within the property, loss of income, and liability coverage. It has distinct features that can’t be found in other forms of insurance. The following tips can help cover a wide portfolio of real estate properties.

  • Dwelling Coverage: This insurance covers physical damage to your property and includes damage to the structure of your apartment or home. For instance, it will pay for the damage to your roof and walls but not for the personal belongings of your renters. The coverage will only pay for damage due to a peril, such as lighting, fire, and more.
  • Landlord’s Property Coverage: Compared to renters insurance, landlord and real estate investor insurance don’t pay for the personal belongings of the tenant who lives on your property. It will only cover objects on the site that belong to the landlord. When looking for rental property insurance, you might want to check if the property coverage is part of the insurance company’s basic policy.
  • Liability Coverage: Liability coverage will safeguard you from medical costs and legal fees if a tenant or guest is injured or hurt while on your rental properties. Typically, if someone is injured around the premises of your home, condo unit, or apartment complex, because of a fault in the structure, that person is covered.
  • Loss of Rent Coverage: This particular coverage protects potential income loss in case the property you rent out is not ideal for living due to damage caused by fire, flood, and other covered perils. You can treat it as a kind of rent guarantee insurance. The coverage will last for a specific period, like 12 months, for example. Take note that loss of rental income is not always present in all insurance. Thus you need to examine your policy before buying it for this kind of coverage.

What is Real Estate Representative Insurance?

Insurance for real estate investors is designed to cover the needs of a real estate representative. Choosing the right real estate representative insurance coverages to fit the needs of your real estate agent is vital, as it can protect against the high costs of claims made against you. 

Real estate representative insurance cost is calculated based on several factors, including business size and claims history. For example, a real estate agency with over ten employees will have different insurance costs than an independent representative. 

Finally, real estate insurance is about 25% more costly than the homeowner’s insurance policy. If you are planning to get insurance, compare quotes from different issuers. You should also consider additional coverage for specific cases of real estate investing and an insurance program that covers different risks like flood or fire.

How Do I Protect My Property Investment?

The goal of every investor is to get the maximum profit from investing in a property. That’s why the most important thing is to figure out how to protect that investment. Here are several steps you can take as an investor:

  • Screen your residents
  • Consider an LLC to protect your personal assets
  • Choose the best investor property insurance policy
  • Prioritize safety on your property

What Qualifies as an Investment Property?

An investment property is real estate you purchase to generate income through rental. Typically, investment properties are purchased by single or group investors who buy the property to earn a return on their investment. 

An investment property can be a long-term or a short-term investment. With short-term investments, investors usually flip the property, in which case the property is bought, renovated, and sold at a profit within a short period. 

Are you still confused about investor property insurance, or do you need some help with getting a quote for your business? Contact us today and get all the information you need fast and for free!