The average real estate investor works their rear end off putting together real estate transactions designed to fatten their investing portfolio, increase their bank account balance, and reach their goals. Then they do their level best to undo all that hard work by making dumb decisions with the way they handle their insurance coverage. Are you a smart, savvy investor destined for the real estate investing hall of fame or do you need remedial education? Take my quiz and let’s find out.

Do you competitively bid insurance coverage for all your properties every year? Too many real estate investors go with the false assumption that insurance coverage is all the same and that there isn’t much difference between companies. This is an erroneous thought. There can be massive differences in the premiums charged by your insurance company – and large differences in the level of customer service and support you can rely on as well. Your property insurance isn’t a car commercial, but you need to regularly ask them what they’ve done for you lately. Chances are – not much – unless you count increasing your premiums and outsourcing customer service to the lowest bidder. Competitively bidding your insurance coverage about once every 1 ½-2 years can solve this problem and keep more of your hard-earned money in your pocket.

Do you understand your coverage or do you rely on your local agent to fill you in on the details as needed? I learned the hard way that insurance agents aren’t always the most knowledgeable sources of information about your coverage you can find. Most agents won’t intentionally mislead you, but they’re only human. Property and casualty insurance is an extremely complicated subject with precise terminology and specific situations that can make a huge difference between being covered and being exposed to a variety of risks. It’s your job to know what coverage you have and what your policies mean. Educate yourself in any way you can: read a book, call your insurance company – the claims office is a good source for reliable information. Take responsibility for understanding your insurance coverage. If you don’t, it’s your rear end on the line and your assets that are at risk.

Do you properly cover your interests on your subject to deals? One of the real estate investing secrets that some of the gurus teach can leave you without coverage in the event of a loss. I’ve heard of so-called gurus – who you would expect to know better – telling their students that it’s perfectly OK to leave the property insurance in the name of the seller. They just work out a deal where the seller would split any insurance proceeds with them in case something were to happen. Not only is this stupid, it violates the insurance policy. On a subject to deal you’re the owner of the property. If the coverage is still in the seller’s name and something happens, the insurance could pay the seller. However, if the insurance company finds out that you’re the legal owner – and there’s no reason to expect that they couldn’t – they will refuse to pay. With a due on sale clause, the bank will call the loan due. If this happens, who do you think they’ll come after? I’ll give you three guesses and the first two don’t count: Y*U!

Are your family’s health insurance needs covered? Becoming a real estate investor doesn’t mean you don’t need to worry about what you’ll do if you or a member of your family has a serious illness, has an accident, or needs major surgery. If you took a guru-promoted real estate investing course, they probably took a lot of time leading you to believe that the sun will forever shine and it’ll never rain on your parade. I want you to stay positive, but it’s not wise to go without health insurance. If you don’t have any – get some. Today. If you can’t afford it, see if your spouse can get coverage through their employer. If that’s not an option for you, the burden rests on you. There are some money-saving options available to you. Look to any associations you belong to because a lot of times you can get health insurance through them at group discounts. You can’t afford not to be covered. Uncle Sam isn’t likely to come swooping in on a magical horse and rescue you from your failure to plan. Do what’s right. You owe it to your family.

Do you have short- and long-term disability insurance? Most real estate investors gave up disability insurance when they left employer situations. What you may not know is you can get coverage at a reasonable price without being part of a large employer group. The rates for this coverage are reasonable and will help replace your income in the event that you can’t work. I know some of you are thinking, “I know, Sean, but I’m not likely to suffer a career-ending injury negotiating a deal, so what’s the point?” The point is you could run off the road on the way over to meet with a seller or you could have a heart attack. In a lot of cases you can protect yourself for less than $75 per month. Why risk it all to save a few bucks?

So how’d you do? Do you know it all or do you need to make some phone calls? I’d rather you do everything you can to protect yourself than expose yourself to risks that can wipe out everything you’re trying to build. Don’t sacrifice your financial stability by not understanding how insurance ties into your overall investing strategy. You’ve come too far for that.

You’re a real estate investor. Consider this an investment in your future.

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