After an active 2017, the state of the habitational insurance market is at perhaps its most volatile point in close to a decade. With three major hurricanes (Harvey, Irma and Maria) and the California mudslides causing damage into the billions, insurance companies that were “all in” in the habitational insurance market are now re-evaluating their commitment to this market demographic.
Habitational property insurance refers to apartment buildings / complexes, condominiums, and multi-unit dwellings (typically reserved for 5+ units in a building).
These property types are beginning to experience concentrated pockets of a hardening market, due to the recent catastrophic losses sustained in 2017. The increased frequency of both wind and hail events adds to this point. Depending on where you are investing (as well as your unique loss history), the property premium increases you experience could be anywhere from 10% – 70%.
If you are investing in areas where major catastrophes have not impacted the market and your recent loss history is good, then your increase should be minimal. If, however, you invest in areas recently ravaged by a catastrophic event, you may experience a larger increase. Particularly if your investment properties were affected by a natural disaster or catastrophe.
So, how do you control your insurance costs moving forward without jeopardizing coverage?
This may prove to be much more difficult than in years past, because the number of carriers still active in this portion of the market is shrinking and the ones that are still offering coverage, have limited capacity or appetite in certain regions of the country. If you find yourself experiencing increases in your annual premiums, consider some of the following ways to control your insurance costs:
Shop your rates.
Work with an independent agent that is contracted with several carriers and programs. This allows your property to be considered by several different carriers, all that may have a very different appetite for the risk in question. You will most likely experience considerable differences in cost options presented to you but be careful as cheaper is not always better. Never jeopardize coverage and piece of mind to save a few bucks.
Consider carrying a higher property deductible.
This can offset some or all of the increase you are experiencing. Increasing your property deductible from $1,000 to $5,000 could save you as much as 25%.
Do you have multiple properties that you own?
If so, combining all of your locations on a single master policy is a fantastic way of driving down your property costs. Leverage your portfolio size to drive down your premium.
Improve your security & fire safety.
Many carriers will provide credits on their rates for providing proof of working hardwired smoke detectors, central station burglar alarms and sprinkler systems. If your property has these amenities, be sure to let your agent know. Provide your agent with as much ammunition as you can to assist in reducing costs.
Have a sound risk management procedure.
Having sound risk management procedures to present to an insurance company underwriter is a powerful “RATE DECREASING” tool. We offer a Hazard Checklist tool to all of our insureds. This helps greatly with loss reduction and decreases claim frequency. Risk management procedures, when properly implemented, will help propel you to being a profitable insured to your insurance company. This will naturally decrease your insurance costs over time.
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 your tenant, it also helps you save money in the long run. Tenants do negligent things and often those negligent things are forced into being covered by your insurance policy, all because your tenant didn’t carry renters insurance. Having a renters policy in force allows a tenant-caused loss to be paid for by the insurance company representing the negligent party. This will assist in stabilizing your property rates long-term.
The impacts of Harvey, Irma, Maria and the California mudslides on the habitational insurance marketplace are just beginning to be felt. Now is the time to work with your agent and take all necessary measures you can to control your insurance costs.
Do not wait until your renewal is a few days out, and you are blindsided with a large increase in premium and no time to shop. Your agent should be proactively shopping your portfolio 60-90 days out from your annual renewal, and if they are not, you should find an agent that will.