Insuring my first rental property

[Kristi Patton]

We are ready to make and offer on our first rental properties in Little Rock, AR. We are looking at purchasing 2 SFR in one deal. The houses are older and are in a low income neighborhood. We are having a hard time finding decent insurance. The quotes we are getting are for $1000 to $1200 per year per house and will not cover a roof over 10 years old. They are also quoting a flat $500 fee for $1 million in liability. That seems crazy to me. The houses are worth about $30k each. My own home is worth almost $300k and we only pay $1400 per year for insurance.

Does this sound about par for the course or am I missing something? Also, we are forming an LLC so is it necessary to have $1 million liability on each property or can our company carry an umbrella liability policy to cover both properties (and any more that we add...)? Thanks for any info you guys can provide!

[James Wise]

We use Foremost (owned by Farmers) for all of our rentals.

We cover the cost of the building and carry $300k liability on all of our properties.

Generally we are paying $600-$800 per property.

[Jeff G.]

I just got insurance for my first property that is over 100 years old. Cost was $60/ month and that is with an extra $10 for sewer back up coverage. Also I have 1M in liability coverage. I found quotes all over the place biggest difference is insuring for market cost vs replacement cost. I dont want to insure for 300k for a home I paid 30k for.

Hope this helps. You have to weigh your risk to save $300 per year if it works for your situation.

Jeff

[Jeff G.]

I happen to be with foremost as well!

[Kristi Patton]

Thanks for the info! @Jeff G. do you mind me asking which insurance company you use? 

[Chanté Owens]

@Kristi Patton  Just a quick note, insurance coverage is regional(state specific), meaning, the rates are associated with your particular region and other factors (weather, etc). Someone in California for the same priced home as someone in Iowa, is going to pay more in California than Iowa, due to a multitude of factors.

Just ask those who live in Florida who are paying astronomical amounts for inexpensive properties, because Florida is one of the highest rated places for property insurance...for obvious reasons (weather). I just wanted to throw that out there, because most will comment on what they are paying, but unless they are in your state, etc, then it's not comparing apples to apples.

[Derek Lacy]

Chante is correct that insurance is regionalized. Actually most insurers are now using data down to the census block level to figure rate. Though Cali is going to be less expensive that Iowa due to wind hazards.

As for your houses, that does seem high for two houses. Though Foremost is also generally one of the highest priced insurers for rental dwelling, so I am surprised by other comments.

If properly managed and in livable condition I would imagine about $1000-1200 for both.
Do be careful about under insuring too. That tends to be the way when costs seems high. Trust me the underinsurance penalty (even foremost has one) is worse than any savings in premium.

I cannot tell you exact numbers without more exact data. Feel free to contact me with any questions.

[Jason Bott]

@Kristi Patton 

 $500 for liability for each location is most likely their minimum premium per policy.  $500 is not an issue if it's a 8 family, but way to high for a SF.  $1500 for both may still be high depending on your building limit and RC or ACV.   There are companies out there who will have a much lower minimum premium, you just need to find them.  Good Luck

[Jessica Lin]

@James Wise 

@Jeff G.

Do either of you have a Foremost agent you work with that you can recommend?

Thanks,

Jessica

[Chris Sukala]

I have farmers insurance and both of our SFR are around 550 a year