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What landlords are doing about the rise in insurance costs

Posted: September 23, 2022

Successful real estate investors spend a lot of time and money making sure that they are always in a position to make as much money as possible on their properties. From the tenant screening process to the way that they handle maintenance issues in their properties, everything is done with the goal of maximizing profits at the forefront of their mind. If you’re a landlord, you know the stress associated with keeping properties profitable. You also know the importance of having landlord insurance in place to keep you and your property protected from financial loss. However, with insurance costs rising along with virtually everything else, it’s important that you understand how other successful landlords are handling the insurance on their properties.

Why Do I Need Landlord Insurance?
Perhaps you’ve been skating by without actually investing in a landlord insurance policy. It’s not uncommon for landlords to avoid paying for a landlord insurance policy, especially if they’re renting their property to someone that they know personally. However, having one of these policies in place provides a great deal of protection for landlords if their property is severely damaged, or if a disgruntled tenant tries to pursue legal action against them. There are lots of coverage options out there for landlords, and many of them don’t fully understand which policy they should choose. However, operating with no landlord insurance leaves you susceptible to a civil suit if a tenant is injured on your property. While landlord insurance can be expensive, and choosing a policy can be a bit overwhelming, investing in insurance is a vital part of successfully investing in real estate.

How Much Does Landlord Insurance Cost?
There are several factors that determine how much you can expect to pay for landlord insurance. In that sense, it’s not all that different from your regular homeowner’s insurance policy. However, as a general rule of thumb, landlords typically pay around 25% more for a landlord policy than they do for a traditional homeowner’s insurance policy. That number has gone up recently, as studies published only a year ago indicated that there was a 15% difference in homeowner’s insurance and landlord’s insurance. However, with the rising costs of virtually everything, insurance has also been affected.

Insurance companies consider the location of your rental property, the type of materials that were used to construct the property, the layout of the home, and the type of property being insured when determining how much to charge for landlord insurance. Even with all of those variables, the current national averages for landlord insurance range between $800 and $3,000 per year. While the lower end of that range may be manageable, more expensive insurance can certainly eat into your profits. So, what should you do?

What Should Landlords Do About Rising Insurance Costs?
The most important step that you can take to combat rising insurance costs is to shop around. Make sure that you’re contacting at least five different insurance companies before choosing a policy that will fully protect you and your property. If you own multiple properties, be sure to ask any potential insurance company if they offer any “bundle rates.”

Additionally, it’s a good idea to have a good tenant screening process in place. While insurance companies likely won’t screen tenants when issuing you an insurance policy, the presence of quality tenants in place helps protect you from a litany of other financial problems. Not only does having good tenants in your properties ensure that you’re receiving the monthly rental checks that you need to pay for insurance, but it also lessens the likelihood that you will need to file an insurance claim. Obviously, you can’t do anything to prevent your property from being impacted by a natural disaster, but good tenants won’t damage the property, nor are they looking for an opportunity to bring litigation against their landlord.

As a landlord, you need to have insurance policies in place that protect you and your properties. However, you should also take the steps necessary to keep those costs as low as possible without sacrificing quality.