14 Mar What does REO Insurance mean in real estate?
Homeowner, hazard and other insurance types are often listed on property paperwork so that owners are always covered for any damages. However, there is another insurance type that’s not as commonly known, REO Insurance.
REO insurance refers to a policy that’s owned by a lender or investor on a particular property. This coverage activates when damages occur without a traditional homeowner living at the residence. REO policies have different meanings in real estate based on the property’s individual situation.
Vacant Home Coverage
A home can be vacant for several reasons, including an extended escrow period or lulls in the rental market. When the property has no one in attendance, it’s vulnerable to break-ins and other damage. Unoccupied property insurance covers nearly every damage instance, such as broken windows or a stripped lock. Investors or lenders simply need to file a claim to resolve any damage situation.
REO Insurance Protection against Vandalism
A property may sit unoccupied for many weeks or months. People passing by the property during this time period might be tempted to vandalize the home. Graffiti, rocks thrown at the windows and other problems might plague the property. Unoccupied property insurance will cover these damages once they’re reported. The damaged item can be quickly fixed or replaced in order to show the property to a prospective buyer.
Natural Disaster Damages
Earthquakes, high winds, floods and fire are all devastating disasters that can affect any property. When an investor or lender purchases insurance for natural disasters in particular, it’s important to read over all of the details that it covers. Some items may not be included in the policy. Only sign the document when the proper disasters are adequately covered. Improper insurance coverage will only cause more financial hardships for the investors.
Injuries on Property
If anyone walks onto the property and becomes injured, the lender or investor is liable for damages. However, REO policies can cover injuries at the property. Real-estate agents, contractors and trespassers are all covered in these policies. Without insurance coverage, medical bills alone can significantly impact an investors’ financial situation.
If an investor or bank is unsure about the need for unoccupied property insurance, a consultation with a professional should be set up. An insurance expert can determine if a property requires REO insurance or not. In the end, it’s always better to have slightly more REO coverage than necessary for those unexpected damages.