As an REInsurePro agent, developing a deeper understanding of real estate investors is crucial for building strong relationships and effectively meeting their insurance needs. Investors have unique goals and differing levels of experience, and knowing the right questions to ask can provide valuable insights into their specific needs. Moreover, understanding investors as a collective group can help you tailor your approach to better serve them as clients.  

Understanding Investor Goals and Strategies

When working with real estate investors, it’s a good idea to start by gaining a clear understanding of their business model and objectives. Begin with open-ended questions like, “Tell me about your business. What are your goals?” This will help you determine their focus: fix and flip properties, buy and hold for long-term investment, or another strategy altogether.   

You may also ask about their experience in real estate investing and familiarity with insurance for these specific properties. If they are seasoned investors, you likely can engage in more advanced discussions about insurance options. Conversely, if they are relatively new to the field, you may take more time to explain fundamental concepts and coverage options.   

Assessing Risk Tolerance

An essential part of working with real estate investors is understanding their risk tolerance. Begin by asking about their comfort level with self-insuring certain amounts or perils. For example, “How large would a loss have to be for you to file a claim?” or “In terms of a deductible, to what amount are you comfortable self-insuring?” These questions help gauge their willingness to handle smaller losses out of pocket in exchange for lower premiums.  

Speaking with your investor clients about their claims expectations can provide a lot of insight. Ask them, “In a claims scenario, what do you expect to be taken care of by your insurance?” and “What are some things you would want covered?” These questions help clarify their priorities and areas they might be comfortable self-insuring. 

Navigating Settlement Methods: ACV vs RC

One of the most critical aspects to ensure your investor client understands is the difference between Actual Cash Value (ACV) and Replacement Cost (RC). This topic can be particularly confusing for those not well-versed in insurance. Still, investors must understand the differences as it directly impacts their potential recovery after a loss.   

Try putting it like this: Actual Cash Value covers the depreciated value of the property and/or its contents at the time of loss. This means the insurance payout reflects the property’s current market value, considering age and wear and tear. On the other hand, Replacement Cost allows claims to be settled with reimbursable depreciation for the damaged property and/or its contents.  

Understanding an investor’s approach to potential losses can help you determine which option is more suitable and avoid underinsuring them. For example, if they indicate that they would rather repair or rebuild the property in the event of a total loss, RC might be the better option. However, if they would rather sell the land and walk away, ACV is probably more appropriate. Although, if in a partial loss, the investor would rebuild, the minimum RC coverage may be the best option. Every situation and investor is different. It’s important to explore many scenarios to make sure the investor is insured as accurately as possible.  

Lender Requirements, Geographical Concerns, and Occupancy Status

Investors often finance their properties through lenders who may have specific insurance requirements. It’s important to ask if there is a lender involved and, if so, what coverages and limits are required. This information ensures that you can include the necessary coverage to meet lender mandates.  

As you know, a property’s geographic location plays a significant role in determining appropriate insurance coverage. For instance, if the home is located near a fault line, as in St. Louis, the investor might benefit from Earth Movement. Similarly, if the property is situated on the coast or in an area that experiences heavy rainfall, it would be wise to recommend Flood coverage. Understanding the environmental risks a property is prone to allows you to provide targeted advice, especially when considering Special versus Basic Form coverage and ancillary products.   

Similarly, the occupancy status of the property, whether it is tenant-occupied, vacant, or undergoing renovation, affects recommended coverages. For tenant-occupied properties, additional products like TPP and Loss of Rents might be appropriate, while properties undergoing renovation could benefit from Special Form coverage to include Theft protection.  

Handling Out-of-State Properties  

For properties located in different states than the investor resides in, they must have enough knowledge of the property’s condition to answer most underwriting questions. Although, some investors may have never seen the property before buying it. While REInsurePro does not conduct property inspections, you can support your clients by researching and analyzing available information. Look at photos of the property to assess the condition, particularly the roof and other critical areas. It’s also a good idea to familiarize yourself with the local weather patterns and natural disasters to suggest relevant coverages. 

Full-Time vs Part-Time Real Estate Investors

Much like their needs, your investor clients’ handiness and resources can vary greatly based on their experience and/or whether investing is their primary source of income or just a side gig. Full-time investors often have a deeper understanding of their risks and insurance needs, making them more discerning about the coverages they select. They might have specific preferences and requirements based on previous experiences.  

Part-time investors, on the other hand, may seek more comprehensive coverage to ensure full protection in the event of a loss, as they may not have the same level of familiarity or resources to manage risks or make repairs on their own. However, this is not a hard and fast rule, and individual preferences/strategies can vary widely.  

Building Strong Relationships with Investors

Overall, building strong relationships with your investor clients is key to providing exceptional service and ensuring long-term satisfaction. By showing genuine care for their business and understanding their unique needs, you position yourself as a trusted advisor rather than just an insurance provider. Take the time to learn how your clients prefer to communicate- whether through phone calls, emails, or video chats and tailor your approach accordingly. Demonstrating your commitment to their success, staying informed on their goals, and offering reliable, knowledgeable advice will foster loyalty and trust. At REInsurePro, our nationwide availability and dedication to agent support ensure that we are a steadfast partner for you and your investors, ready to help protect their valuable investments.