Building Your Real Estate Investment Team – Part 6: Selecting an Insurance Broker

This post was written for The Rentables Apartment Blog as the sixth part of a series entitled “Building Your Real Estate Investment Team.”

Moving on to the next part of our series on building your real estate investment team, we examine how to select an insurance broker or agent as part of your team. A broker will typically work with multiple insurers and can shop around for the best rate, while an agent will generally represent a single insurer. Before closing you’ll need to have insurance in place, and a good broker or agent can take care of all the details. For the remainder of this article, we will use the terms broker and agent interchangeably.

Having an insurance broker well versed in the type of rental properties you deal with is important to ensure you get the right coverage. As a landlord, your insurance needs are likely a little different from the typical homeowner. We’ll provide a couple examples where things may differ and give you the knowledge required to select a great insurance agent for your real estate investment team.

Real Estate Investment Team selection criteria
We realize by the 6th installment of this series, you have seen this list before and it is getting a little played out, but here are the things you’ll want to look for when selecting any member of your team, and an insurance agent is no different.

Owns investment real estate themselves
Cares about your goals
Has the appropriate qualifications
Has specific experience working with investment properties in the area
Has reasonable fees
Provides positive chemistry

Why Add an Insurance Broker or Agent to Your Team?
After passing off on the home inspection and waiving your conditions you’ll be headed toward closing your deal. Most lenders require the property to be insured as part of the mortgage conditions so you’ll need to arrange insurance on your property before closing. Better yet, working with a good broker, you’ll be able to confirm that your property is insurable before waiving your conditions. An insurance broker can help you by:

Evaluating insurance needs
Advising on appropriate coverage
Obtaining premium quotes
Answering any questions

Having a quality agent on your team will provide you with the confidence of knowing you have the right coverage at a reasonable rate.

Insurance Broker / Agent Compensation
When dealing with insurance for residential real estate you’ll rarely encounter any fees. Most agents are compensated by the insurers they work with, and your policy premiums will be your only out-of-pocket. Of course, if you have a claim you may need to cover a deductable, but there should be no need to pay your agent upfront.

Finding an Insurance Broker / Agent
Again, when looking for an insurance representative, you can flip through your local Yellow Pages, take your search online, or best of all seek referrals from other investors or members of your real estate investment team. Often your Realtor will be able to recommend a suitable insurance professional in your area.

Qualifications
As with most types of professional, there are usually regional or national associations which serve as governing bodies for insurance agents. Look for a professional that is licensed or affiliated with the appropriate organization in your area and for someone who specializes in property insurance.

Investment specific experience
Taking the time to find an insurance professional with investor specific experience is important. As an investor you will have unique insurance needs and it is best to have a representative who understands the coverage you need as a landlord. Selecting a broker or agent who owns investment real estate themselves is an even better choice since you’ll be on the same wavelength.

One example of an issue to be aware of is the length of vacancy allowable by your insurance policy. Many property insurance policies cover only 30 days of vacancy, and despite the best of intentions vacancies sometimes last more than 30 days. If your insurance lapses due to this technicality you could find yourself in trouble with the bank. An agent who understands the needs of a real estate investor will be able to arrange more appropriate coverage and ensure you are actually covered when you need it.

Narrow down a few insurance professionals and then consider whether they meet the 6 criteria above. Meet with a couple brokers to see who you think would be the best fit for your team and then start working together to test the waters. If you’re happy with your agents work on your first deal you are done, if not, keep looking.

Check back soon for Part 7 of Building Your Real Estate Investment Team where we’ll provide some tips on selecting a Property Manager.