Owning investment properties can be a profitable endeavor—but it comes with responsibilities and risks. One area that often gets overlooked until it’s too late is insurance. Unlike a standard homeowner’s policy, insurance for investment properties involves unique coverage types, legal implications, and lender requirements. If you’re an investor, understanding how to navigate insurance requirements is critical to protecting your assets and your profits.
1. Understand What Type of Property You’re Insuring
The kind of investment property you own will influence what insurance you need:
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Single-family rentals may require landlord policies.
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Multifamily units may need additional liability coverage.
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Vacant properties often need specialized vacant property insurance.
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Fix-and-flip projects typically need builder’s risk insurance.
Knowing your property’s category helps you choose the right policy structure from the start.
2. Know What Lenders Require
If you’re using financing, your lender will likely require proof of insurance before closing. These requirements often include:
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Minimum dwelling coverage that covers the full replacement cost
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Liability coverage, usually $500,000 to $1 million
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Loss of rents coverage, especially for rental properties
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Additional endorsements such as flood or windstorm in certain zones
Pro Tip: Always request a lender’s insurance requirements early in the underwriting process to avoid delays.
3. Choose the Right Policy Type
Here are common policy options for investment properties:
Landlord Insurance (Dwelling Policy DP-3)
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Covers structure, liability, and loss of rental income
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Designed for tenant-occupied properties
Builder’s Risk Insurance
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Needed during renovation or new construction
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Covers theft, vandalism, and damage during construction
Vacant Property Insurance
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Covers homes that are unoccupied for more than 30–60 days
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Regular policies often exclude coverage during vacancy
4. Consider Additional Coverages
Depending on location and property condition, you may need:
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Flood insurance (even if you’re not in a high-risk zone)
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Earthquake insurance
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Umbrella policies for extra liability protection
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Equipment breakdown for multifamily HVAC and boiler systems
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Ordinance or law coverage for older buildings requiring code updates after a claim
5. Don’t Underinsure
Trying to save a few hundred dollars on premiums could cost you tens of thousands in uncovered claims. Be sure to:
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Insure to replacement cost, not market value
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Review policies annually and adjust for inflation or improvements
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Keep updated inventories, rent rolls, and renovation records
6. Work With an Insurance Agent Who Understands Real Estate Investing
All insurance agents are not created equal. You want someone who:
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Understands your investing strategy (e.g., BRRRR, fix & flip, buy & hold)
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Can bundle coverage for multiple properties
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Offers speed in providing binders and COIs
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Knows how to communicate with lenders and underwriters
Look for agents who regularly serve real estate investors—not just retail homeowners.
7. Keep Proof of Insurance Organized
You should be able to access your certificates of insurance (COIs), declarations pages, and contact info for your insurer easily—especially when:
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Refinancing
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Selling a property
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Filing a claim
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Renewing policies
Cloud folders, CRMs, or property management software can help you stay organized.
Final Thoughts
Insurance isn’t just another item on your due diligence checklist—it’s your safety net. Whether you’re holding for cash flow or flipping for profit, the right insurance coverage ensures that one mishap doesn’t wipe out months—or years—of hard work. Take the time to get your coverage right the first time, revisit it often, and always work with professionals who understand investment real estate.
