Five Kinds of Property Insurance and Who Needs Each One

Insurance is one of those things you hope you never need, but when you do, the right policy can be the difference between a stressful week and a financial disaster. Whether you own, rent or invest in property, it helps to understand the main types of coverage and which ones apply to you.

Coverage for Where You Live

1. Homeowners insurance

If you own your home, a homeowners policy is the foundation of your protection. It typically covers the structure itself, your personal belongings and liability if someone is injured on your property. Many policies also help pay for temporary housing if a covered event forces you to move out during repairs.

If you have a mortgage, your lender will typically require homeowners insurance with at least enough coverage to protect the loan, and the premium is often paid through your escrow account. Pay close attention to your deductibles, especially any separate deductible for wind or hurricane damage, which may be a percentage of your dwelling coverage rather than a flat amount.

2. Renters insurance

Renters often assume the landlord’s insurance covers their stuff. It usually does not. A landlord’s policy protects the building, not your furniture, electronics or clothing. Renters insurance covers your personal property and provides liability protection, and it is usually quite affordable. Many landlords now require tenants to carry it and keep proof on file.

Coverage for Investors and Extra Protection

3. Landlord insurance

If you rent out a property, a standard homeowners policy may not be enough, because most are designed for owner-occupied homes. Landlord insurance, sometimes called a dwelling policy, is built for rentals. It typically covers the structure, liability and, in many cases, lost rental income if the home becomes uninhabitable after a covered loss. If you use the property as a short-term rental, ask your agent about coverage designed specifically for that use.

4. Umbrella insurance

An umbrella policy adds an extra layer of liability coverage on top of your home, auto and landlord policies. It kicks in when a claim exceeds the limits of your underlying coverage. Umbrella policies can be especially valuable if you own multiple properties, have a pool, host guests often or have significant assets to protect. They are generally inexpensive relative to the amount of coverage they provide.

Coverage Standard Policies Leave Out

5. Flood insurance

This is the one that catches people off guard. Standard homeowners and renters policies generally do not cover flood damage, whether from storm surge, heavy rain or rising water. Flood coverage is purchased separately, either through the National Flood Insurance Program, which is managed by FEMA, or from private flood insurers where available.

What you pay depends on factors such as your flood zone, the elevation of your home and how it is built. If your home is in a high-risk flood zone and you have a federally backed mortgage, flood insurance will typically be required. Even outside high-risk zones, many homeowners choose to carry it, since flooding can happen in places that have never flooded before. Keep in mind that new flood policies often have a waiting period before coverage starts, so do not wait until a storm is on the way.

Tips for Choosing and Reviewing Coverage

• Shop early when buying: Get insurance quotes during your home search, since premiums can vary a lot from one home to another and affect your monthly payment.
• Review every year: Renovations, new purchases or rising rebuilding costs may mean you need more coverage.
• Ask about discounts: Wind mitigation features, impact windows, newer roofs, security systems and bundling policies may lower premiums.
• Keep a home inventory: Photos or video of your belongings make claims much easier.

When you estimate a home’s affordability, include insurance alongside principal, interest and taxes. Our mortgage calculator lets you factor it in. Investors can also explore our investment property loans.

Have questions about how insurance fits into your mortgage payment? Talk with a FLO Mortgage loan officer and we will help you see the full picture.

This article is for general education and is not a commitment to lend. All loans are subject to credit approval, underwriting guidelines and program availability. FLO Mortgage, Company NMLS #1835856. Equal Housing Opportunity.