Rising property insurance costs are a growing problem for landlords. These add up to their monthly expenses and may significantly impact profitability. However, there are several things landlords can do to adapt to these increasing insurance premiums.
Rising Property Insurance Costs
The rising property insurance costs may seem surprising to some, but it’s not entirely unexpected. Natural disasters such as wildfires, hurricanes, and floods have become more common in recent years. Moreover, the intensity of these calamities has increased as global warming continues to affect the planet.
Because of these catastrophes, insurance companies have seen a rise in insurance claims. As a result, these companies have raised their monthly premiums to manage risk. This has been especially pronounced in disaster-prone areas. For instance, Florida has always been vulnerable to hurricanes, so it has always been known to have much higher insurance rates. Annual premiums can go as high as $6,000 — quadruple the nationwide average.
Apart from natural disasters, there has also been a rise in property damage incidents. Wear and tear is one of the most common culprits, but manmade damages from vandalism and crime can be just as destructive. Insurance companies have to reassess the risk as these instances have increased in frequency and severity.
How Landlords Are Affected
Landlords rely heavily on property insurance to maintain their investments. However, rising property insurance costs have become large enough to increase monthly operational expenses and decrease net profit. Landlords must pay higher monthly premiums even if their properties—and rental rates—have remained the same.
In addition, the rising cost of insurance has forced some landlords to compromise on coverage to counteract the increase. This can lead to serious financial losses, as less coverage can become more costly in the long term. On the other hand, purchasing plans with extensive coverage is not always feasible. Expensive insurance policies can sometimes make real estate investments more trouble than they are worth.
How to Save Despite Increasing Property Insurance Costs
With the rising property insurance costs, what can landlords do to save money while maintaining ample coverage? Here are some tips and tricks you can try as a property owner.
1. Regular Property Maintenance
Insurance exists to curb risk, but it’s not the only strategy you can employ to mitigate financial risk. Landlords can also turn to proper maintenance to ensure their investments are protected. As a landlord, make sure to routinely inspect the property and conduct regular cleaning and maintenance activities.
It’s often helpful to spot minor problems early. This way, you can nip them in the bud and stop them from becoming larger damages requiring repairs or replacements. Be sure to check the essentials, such as plumbing, foundation, structural issues, and electrical systems. Proactive maintenance will extend the lifespan of the property and reduce the cost of maintenance and the need to file insurance claims.
2. Shop Smart
Landlords should not settle for the first insurance company that gives them a quote. Instead, request several quotes from various companies that offer the same coverage. Doing this will allow you to find the best deal with the most coverage. Furthermore, consider negotiating with these companies, as they might give you better deals if you ask for discounts and adjustments. Negotiating lower premiums might also be helpful if you have a history of very few insurance claims.
You can also consider working with an independent insurance agent who can help you find competitive prices and the right coverage. They can also help you navigate the options and find one that suits your needs and budget.
In addition, we recommend checking customer reviews to ensure you’re getting the most out of your money. If an insurance company has dubious practices, it’s best to disregard it altogether, even if it offers attractive rates.
3. Invest in Property Improvements
Several property enhancements can reduce your need for insurance and mitigate risk. For example, installing hurricane-resistant doors and windows might be worth considering if the rental property is in Florida. Properties like these are less prone to damage and may receive discounts on premiums.
Apart from natural disasters, landlords should also be wary about other potential threats like crime. Consider installing reliable security systems such as surveillance cameras, motion detectors, and alarms. Adding smoke detectors, carbon monoxide detectors, and sprinkler systems can save you a lot of money.
For apartment owners, enhancing safety could mean adding fences and gates or employing security guards to increase security. These add up to a lower risk profile, which could convince insurance companies to lower your premiums.
4. Adjust Your Deductibles
Higher deductibles lead to lower premiums while lower deductibles lead to higher premiums. It’s an industry standard that will continue to define the cost of insurance. Given this fact, it might be wise to increase your deductibles before signing an insurance contract.
5. Reconsider Coverage Options
Ample coverage is important, but you must also weigh the need against possible risk as a landlord. Consider your tenant turnover and property location before settling on your coverage options. Is your property’s location prone to certain disasters? Do your tenants stay for the short or long term? Aim to balance the price with extensive protection.
6. Bundle Policies
Consider consolidating your insurance policies under one bundle and insurance provider to save money. This often provides significant cost savings as you don’t need to purchase individual policies from various agencies.
Do you need landlord insurance? Consider combining it with other policies, such as your homeowners insurance and auto insurance. Doing this often yields a discount to incentivize customers.
7. Maintain a Good History of Insurance Claims
Insurance companies often consider your claim history when deciding your premium. Those with a history of making large, frequent claims are often considered higher risk. If possible, try to minimize your insurance claims or even aim for a claims-free history. This can keep your insurance costs low and widen your pool of providers.
8. Screen Tenants
Landlords often screen their tenants to ensure financial stability and responsible behavior. However, screening tenants is also useful for minimizing insurance premiums. Relational tenants are less likely to damage your property or make late payments. As a result, you will have fewer bad debts and won’t need to make as many insurance claims.
Additionally, some insurance companies may even provide landlords with a history of picking trustworthy tenants with lower premiums. Safeguard your property and lower your monthly premiums with careful tenant screening.
9. Update Your Coverage Annually
Insurance needs will change over time. Let’s say you make an improvement on your property that significantly reduces the risk of flood-related damage. In this case, reconsidering your flood coverage and lowering your monthly premiums may be a good idea. Consider updating your coverage annually so you’re not paying for coverage you do not need.
10. Maintain a Good Credit Score
Landlords with good credit scores can access more competitive rates from insurance companies. After all, a good credit score indicates financial credibility and ensures that you are not a large financial risk.
Protect Your Property Today
Rising property insurance costs are problematic, but they aren’t the end of the world for landlords. Property owners can still take several steps to ensure they get discounts and avail the best rates in the industry.
Do you need a trustworthy property management company in Florida? You can find one today through our online directory!
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