Your adrenaline is pumping because you just put your first real estate deal under contract! Now the real fun begins…

On your purchase sale agreement (PSA), you see a long list of dates and deadlines, one of them being “Property Insurance Termination Deadline.” Your job is to find a homeowners policy that meets a provision that goes something like this (example is from a Colorado PSA):

“Insurability. Buyer has the right to review and object to the availability, terms, and conditions of and premium for property insurance (Property Insurance). Buyer has the Right to Terminate under § 25.1, on or before Property Insurance Termination Deadline, based on any unsatisfactory provision of the Property Insurance, in Buyer’s sole subjective discretion.”

Now, let’s dive in!

What Is Homeowners Insurance?

Homeowners insurance is a form of property insurance that covers losses and damages to an individual house along with assets in the home. While carrying this type of insurance (in my mind) is an investment MUST (consider it as your first line of asset protection defense), if you are putting a loan on the property, having homeowners insurance becomes a requirement.

It’s important to understand what a homeowners insurance policy is, and how to read a basic declaration page. That way, you know what is covered under your policy and what is not. Additionally, it’s important to not confuse homeowners insurance with a home warranty or mortgage insurance.

The homeowners policy will usually cover:

Interior damage
Exterior damage
Loss or damage of personal assets
Liability coverage against accidents that occur in the home on or the property

Every policy has a deductible and a liability limit, which will dictate the amount of coverage the insured (you!) has should an event that causes loss and/or damages occur.

How to Get a Homeowners Insurance Policy
While securing a homeowners insurance policy might be one of the simpler tasks on your due diligence list, knowing how to get a great insurance policy is a little less intuitive. Here are the steps to follow when sourcing a good agent and reviewing your declarations page:

1. Find Local Insurance Agent(s)
Find an insurance agent that underwrites homeowners insurance policies in the area your property is located.

Here are three main sources you can use to find a good insurance agent:

Ask other investors who have property in the area where your new prospect is located
Ask your realtor or lender if they know of a rockstar agent
Check out referrals on BiggerPockets forums

Pro Tip: While it may be tempting to shop around to continually get the best rates for each new acquisition, when you have found a GREAT agent to work with, think about concentrating your business with them to save you time (and to keep your sanity!).

Keep reading the article “Complete Guide to Homeowners Insurance: What’s Covered, What’s Not, & How to Find an Agent” here:

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