How to Insure a Real Estate IRA Property

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Real Estate IRAs can seem tricky to many investors, but Jim Hitt, CEO of American IRA in North Carolina, recently published an article on the American IRA blog explaining the tactic of insuring a real estate IRA property without breaking any rules.

American IRA CEO

American IRA CEO, Jim Hitt

You should not be using a standard HO-3 homeowner’s insurance policy. You don’t live in the home yourself (IRA rules prohibit you from doing so), and you’re probably renting it out. So the insurance policy you need is a landlord’s insurance policy, not a straight homeowner’s insurance policy.

Owning a real estate property within a Real Estate IRA is not only a great way to build wealth, but it can be a tremendous boon to an investor’s retirement nest egg. Jim Hitt of American IRA recently took to the American IRA blog to explain how investors can further protect this nest egg by insuring their Real Estate IRA property in the proper manner.

According to Jim Hitt, investors should consider insuring their Real Estate IRA property as they would their own home—the difference is in the way an investor might go about it. Like any property, an investor wants some assurance that they’ll have what they need for long-term protection, which in turn boosts the feeling of financial security.

But Jim Hitt also explains that there are certain rules and regulations that Real Estate IRA investors will need to comply with to avoid taxes and penalties.

“First,” said Jim Hitt in the blog, “you should not be using a standard HO-3 homeowner’s insurance policy. You don’t live in the home yourself (IRA rules prohibit you from doing so), and you’re probably renting it out. So the insurance policy you need is a landlord’s insurance policy, not a straight homeowner’s insurance policy.”

This demonstrate a critical difference between holding property in an IRA and not in a general way—investors have to separate themselves from the IRA to a large degree.

Jim Hitt also made the point that the insurance policy should not personally benefit the investor as the beneficiary—the account itself should be the beneficiary of the insurance policy.

Insurance premiums, too, will be separated from investors’ usual finances and will be paid by the IRA itself. Jim Hitt explains that a Self-Directed IRA administration firm like American IRA can be contacted to figure out how to make the logistics of such a transaction take place.

“With this article, I wanted to show people what it’s like to protect yourself with a Real Estate IRA,” said Jim Hitt. “Many people don’t know just how separate you have to be from the real estate within your retirement account. But if you do it right and work with a reputable Self-Directed IRA administration firm, the paperwork becomes much easier to handle.”

About:

American IRA, LLC was established in 2004 by James C. Hitt in Asheville, NC.

The mission of American IRA is to provide the highest level of customer service in the self-directed retirement industry. Mr. Hitt and his team have grown the company to over $250 million in assets under administration by educating the public that their self-directed IRA account can invest in a variety of assets such as real estate, private lending, limited liability companies, precious metals and much more.

As a self-directed IRA administrator they are a neutral third party. They do not make any recommendations to any person or entity associated with investments of any type (including financial representatives, investment promoters or companies, or employees, agents or representatives associated with these firms). They are not responsible for and are not bound by any statements, representations, warranties or agreements made by any such person or entity and do not provide any recommendation on the quality profitability or reputability of any investment, individual or company. The term "they" refers to American IRA, located in Asheville, NC.

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Sean McKay
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