What types of insurance policies should I get for my turnkey real estate investment?

Buying an investment property is a significant financial risk, and it is vital to have proper insurance in place to cover unforeseen damage that may occur. For those new to real estate investments, it can be tricky to determine what type and how much insurance you need. Continue reading to find out what type of insurance our experts recommend for investors.

Laura Adams

Laura Adams, MBA, is an insurance expert with FreeAdvice.com.

Table of Contents

Dwelling Policies

Buying a turnkey real estate investment and being a landlord both come with legal responsibilities and risks. Before you close on a property and have tenants, shop for landlord insurance, also known as a dwelling policy.

Different dwelling policies, such as DP-1, DP-2, and DP-3, offer different protection. For example, DP-1 covers risks, including theft and vandalism. DP-2 expands coverage to include disasters like fire and windstorms. DP-3 covers all perils except those excluded in the policy.

While a DP-3 policy is the most expensive, it gives owners of a turnkey real estate investment the most protection. In some cases, a dwelling policy may reimburse you for loss of rental income if your property gets damaged. Be sure to discuss that option with potential insurers as you compare policies.

Since insurers take on more risk with a non-owner-occupied dwelling, they charge more. Depending on the location, size, and condition of your turnkey real estate investment, you may pay up to 30% more than a typical homeowner policy.

Liability and Flood Insurance

Turnkey properties are those that are fully renovated, enabling the buyer to rent out or purchase immediately. From my experience, these turnkey investments should be supported with insurance policies, and here's a list of what should be acquired:

Liability insurance
You'll never know what will happen within your property, and liability insurance is the safest way to protect you and your property from damages caused by an unfortunate event.

Flood insurance
It will give more comprehensive coverage, especially for property in a flood-prone area. It can assist in the repairs caused by big floods, poor drainage, or even natural phenomenon like hurricanes or storms.

Nick Schrader

Nick Schrader, Insurance Agent at TexasGeneralInsurance.com. Nick has been working with insurance companies over the past decade and has seen the changes technology brings in for better or for worse.

Jake Hill

Jake Hill, CEO of DebtHammer.

Landlord Insurance

Landlord insurance is the usual go-to. This differs from homeowner’s insurance and covers things more relevant to landlords, such as the event of tenant negligence or deliberate damage. It will also typically cover damage done by the elements or freak accidents, but dig into the policy to find out.

You may also want to insist your tenants purchase renter’s insurance to keep their valuables safe. It will give you some liability protection in case something happens under your watch.

Basic Hazard Home Insurance

Basic hazard home insurance is all you need for an investment property. It will be written as a landlord policy where you are not the occupant of the property. By shopping for the right coverage, this policy will cost similar to that of your home's policy.

AJ Chinn

AJ, Licensed Real Estate Agent & Investor. He runs the Phenomenal Properties KC.

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