Whether buying a home to live in, as an investment or a fix-n-flip property, obtaining the right insurance is essential. If something were to happen, from a fire to an accident on the property, your homeowners insurance could make or break your investment.
3 tips to Consider When Looking at Property Insurance
- Compare coverage of at least 3 companies. Your mortgage lender will probably require you to have homeowners insurance and may even require supplemental insurance, such as flood or hurricane coverage. Compare coverage, costs and customer reviews. Be sure you get the right type and amount of coverage. Also select a company with good customer service reviews, as the majority will likely come after dealing with the company during a time of disaster.
- Escrow your insurance costs with your mortgage payment. An escrow account allows you to add your insurance costs onto your mortgage payment. The lender will pay your insurance premiums out of your escrow account. Lenders prefer this option because it lets them know your insurance premiums are being paid, and their investment is protected. Some lenders will also allow you to tack property tax onto your escrow account in the same manner.
- Make sure you're getting adequate coverage. The most important part of homeowners insurance is the level of coverage. Avoid paying for more than you need. Before comparing insurance options and coverage, make sure you understand some of the basic insurances terms, such as deductible, liability coverage, replacement cost, actual cash value and sub-limits.
With the variety of situations and options involved in property investment, choose an experienced lender who has the industry insight and knowledge to know when there are red flags.