When you are in a rent-to-own contract for a home, what would be the best way to insure the home while paying the mortgage?

Asked by George Middleton

1 Answer

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Answered by Donn Sharer , CFP ChFC CLU in Millstone Township, NJ
Hi George - To make sure I'm understanding your situation clearly, you'll be renting the home for a period of time and have an agreement to purchase the home or walk away at the end of that period. A portion of your rent payments would likely be applied to the mortgage.

Two key considerations. For you, a renters insurance policy to cover your personal property (all the stuff you move in). Would set the liability limit at $300,000; higher if your assets are over $150,000 and/or you have a job that pays well.

Since you don't own the property yet, the seller should change their homeowner insurance policy to a landlord or dwelling/fire policy as they will no longer be living there. At a minimum, they should get something in writing confirming that their current policy would cover them if something happens to the home. You don't want any issues if there's damage to the home.. It's possible that their current policy covers them as a primary homeowner living in the residence, but it may not cover rental activity. May cost them a little bit more but best to be safe in this situation.

Does that address your situation? | 09.09.15 @ 22:16
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 08:34
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Answered by

Donn Sharer
Donn Sharer , CFP ChFC CLU in Millstone Township, NJ

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