Follow these tips to manage your property insurance costs and always work with an agent who is looking out for your best interest as an investor.
1. SHOP FOR THE BEST RATES
You should work directly with an independent broker that specializes in insuring residential rental properties (apartments, single family rentals, duplexes, triplexes…etc.). Be sure that the broker represents multiple insurance companies that specifically want to insure rental properties. This is extremely important for many reasons: no one company is interested in every rental property, and if they were you would likely be paying a higher premium. Using multiple insurance carriers ensures the broker can offer you the broadest coverage and most competitive price for your specific rental properties. Such a specialist also knows how to best protect your assets because they are working with properties similar to yours each day.
2. RAISE YOUR DEDUCTIBLE
Deductibles are the amount of money you have to pay towards a loss before your insurance company starts to pay a claim on your policy. The higher the deductible is, the more money you can save on your premiums. Insurance companies typically require a deductible of at least $1000. If you can afford to raise your deductible to $5,000, you may save as much as 25% on your premium. You can also raise your deductible on problem areas of your portfolio, such as Wind/Hail. It may be a wise choice to have an increased deductible on wind/hail if you have had prior losses. Another example would be a separate ‘water damage deductible’. If you have sustained a water damage claim of significant size, it may be best to take a larger deductible in that area to ‘offset’ the risk for the insurance carrier.
3. COMBINE POLICIES/LOCATIONS ONTO ONE POLICY
In most cases insurance companies have a ‘minimum premium’ threshold for an individual policy. In some cases, it is more cost effective to combine your portfolio onto one policy. A rental property insurance specialist can (when using the correct program) combine occupied, vacant, and rehab properties onto one policy. Often companies offer multiple location/building discounts. Such discounts often increase with the number of locations on a policy. Discounts of 5-30% are common.
4. IMPROVE SECURITY/FIRE SAFETY
Hardwired smoke detectors, central station Reporting, fire & burglar alarms, sprinkler systems, Etc. These may generate discounts of up to 25%+ (depending on the insurance company).
5. CHANGE CO-INSURANCE PERCENTAGE TO MATCH YOUR NEEDS
If you are insuring your buildings to their full replacement cost then increase your co-insurance percentage to 100% (increasing the co-insurance from 80 % to 100% will reduce the rate that you pay). The opposite may be true for older buildings, if you could fully rebuild your building using modern construction techniques for less than it would cost to replace with like kind and quality, you may reduce the building’s replacement cost to a limit that equals the modern construction replacement cost. So, if that limit is 20% lower than the full replacement cost you insure at the lower limit and reduce the coinsurance requirement to 80%.
6. IMPROVE THE EXTERIOR APPEARANCE OF YOUR PROPERTY
Most insurance companies want to see photos of the property before giving the cost of the insurance. Many companies offer higher pricing or refuse to insure the property due to how the property presents itself on the exterior. Big negatives include: peeling paint, damage/deteriorating siding, some or all of the roof being in bad shape, garbage in hallways or outside the building, lack of handrails, Etc.
7. ASK ABOUT OTHER DISCOUNTS
A number of discounts may be offered by companies as we mentioned, but they may not offer the same discount or the same amount of discount in all states. You must ask your broker or company representative about any discounts available. Nothing is automatic. Shop, compare and ask. Insurance knowledge can be powerful. Be informed.
8. REQUIRE ALL TENANTS TO CARRY RENTERS INSURANCE
Many rental property owners have a clause in their lease requiring the tenant to carry renters insurance. While this is a plus for them it also helps you save money in the long run. Tenants do dumb things and often those dumb things are forced into being covered by your insurance policy, all because the tenant didn’t carry renters insurance. If they do carry renters insurance, their policy will pay for many liability and property losses on your premises. The less claims that you have the lower your cost of insurance. If you don’t want the hassle of ensuring your tenant’s renters policy is in force, check out our Tenant Protector Plan.
Note: This piece is not to be construed as contractual. Applicable policy language supersedes it. Information contained in this excerpt is intended to provide a brief overview of the coverages provided for reference purposes only. It is not intended to provide all policy exclusions, limitations and conditions.