10 Great Property Insurance Tips for Landlords to Save You Cash, Headaches, and Time

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Insurance is one of those pieces of being a landlord that can make you pull your hair out.

It starts off easy enough.  When you purchase your first couple of rental properties getting insurance is generally no problem.

Often you can go to the agent that provides your homeowners or automobile policy and get coverage for a reasonable price.

Things begin to change however as you build your portfolio.  Once you acquire four, five or more properties you really do not fit the mold anymore, and you begin to be seen as a risk.  It is at this point that insurance problems begin to arise.

Suddenly, without ever filing a claim your rates double.  Or, even better, you get the notice that the company is dropping your coverage.  I once had a company drop me only 10 days after I closed!

The insurance companies often do not make the process of finding, maintaining and keeping it simple.  There are unfortunately no easy insurance answers.  There are however several pointers that I can give based upon my experience in the business.

1. Never, ever make a claim

The only time you want to make a claim is if it is a total loss or catastrophe.  You can sometimes claim minor repairs and damages, but I would strongly advise you against it.  Every claim you make is a mark against you.

It stays on your record for years just like a credit report.  After too many claims you get jacked up rates or dropped.  It is much better in the long run to absorb the minor damage and repair costs.

2. Find an agent or broker you can trust and who understands your business

This will not likely be with the major carriers nor will it be easy.  Look to your local REIA or other landlords for suggestions.  Sometimes going to a broker who can shop your properties to many different companies can be advantageous.

3. Never call the 1-800 number, even if just asking for information

Doing so could be counted as a claim against you even if you do not have one.  Instead find an agent you trust and discuss any issues or matters with them “off the record” so to speak before calling or making a claim.

4. Use a high deductible to keep costs down

You are not going to be making claims anyway, so why not have a $5,000 deductible?  Check with your lender however as they may not allow such a large deductible amount.

5. Have enough coverage to get the bank or other lender out of the way and the property cleared if something major happens

This method is usually cheaper than full replacement cost.  If a disaster happens, you can pay off the bank, clear the lot and start over from that point.

6. Get liability insurance not just property insurance

As a landlord you need to protect yourself from lawsuits.  If someone slips and falls, you will need this type of insurance.  Increase the coverage amounts as your portfolio grows.

7. Keep your properties well maintained

You never know when an insurance inspector is looking around looking for a way to drop your coverage.

8. Meet with your agent every once in a while

Do not assume things are on autopilot.  They are not.  Insurance is something you need to keep up with.  Read every notice you get and be sure you understand it.  Plus your insurance agent can be a big help to you if you ever need it.  Build up a good business rapport.

9. Package all of your insurance needs with one company to save money

For example, you can try to place your car, personal home, liability coverage and investment property coverage all with the same company.  Insurance companies like policy bundles.

10. Never ever make a claim unless it is truly a disaster

I know I already said that.  But I felt it was important enough to mention again.

Insurance is one of those things many of us must have and/or want to have in order to protect ourselves and our investments.  Just be warned going in to this business, insurance can really try your patience.

What are your experiences with insurance as a real estate investor?  Please share in the comments
Photo Credit: Anthony Quintano

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About Author

Kevin Perk is co-founder of Kevron Properties, LLC with his wife Terron and has been involved in real estate investing for 10 years. Kevin invests in and manages rental properties in Memphis, TN and is a past president and vice-president of the local REIA group, the Memphis Investors Group.

53 Comments

  1. I would also add “READ YOUR POLICY” to understand the total coverage — and not just the outline.

    Kevin, I assume that you are an insurance buyer. It would be nice to get some confirmation of these points from a insurance seller (both agent/broker and company insider).

    • Kevin Perk

      Kevin,

      Good point. There is a lot of fine print in there.

      Yes I am a buyer. It would be nice to hear from some insurance folks on this topic.

      Thanks for reading and commenting. I do appreciate it,

      Kevin

      • Kevin,
        As you requested, here is one comment from an insurance agent, though one who represents and alternative to renter’s insurance, rather than the owner’s master policy.

        You make some great points about owner’s insurance or the Master P&C policy,but why should you or any owner or management company bear the brunt of damage residents cause. I would strongly suggest implementing a requirement that each resident indemnify you or provide proof of their ability to do so by providing coverage with their own HO4 (renter’s policy) or through a community based Property Damage Loss Waiver® program such as RLL®. It provides coverage for community damage and content protection for the resident as well.

        In this way the resident pays for the coverage, not the owner and the claims do not hit against your owner’s or master policy.

        Regards,
        Brent Rasmussen
        National Sales Manager
        Renter’s Legal Liability

        • Kevin Perk

          Thank you from responding Brent,

          We strongly encourage renter’s insurance and do discuss with our new tenants how it works but I do not require it.

          You have provided some food for thought. I will look into it.

          Thanks for reading and commenting,

          Kevin

  2. Hi Kevin,
    Thanks for the good post. I would amend number 9 though to say “consider” bundling policies. I thought going with one company would always be cheaper, but when I rant the numbers on my home/auto/umbrella policies, splitting saved me hundreds per year because one company was much less for auto, another much less for home/umbrella.

    • Kevin Perk

      Adrian,

      My auto policies are a little high as well but the company wanted them along with the property policies. Remember I do not fit the mold anymore. I don’t like to rock the boat to much with insurance so we went with it. But you are correct. Take a look, check the market and do what works for you.

      Thanks for reading and commenting,

      Kevin

      • You failed to mention that a cash value policy is going to screw you when that hail storm destroys your roof. Roof is 10 years old? Life of roof is assumed to be 15 years – they only pay 30% of the cost for a new roof. Can’t prove how old the roof is, they pay 0%.

        With a replacement policy you pay the deductible and get a brand new roof.

        • Your absolutely right, the small difference in premium to go all risk, full replacement cost is the best investment you can make. As an agent I always refused to write F&EC on anything and not because of premium, my commission difference was literally pennies. My primary reason was it was best for my client. It also prevented me from having an E&O claim when my client had a claim that only paid him ACV repairs. People tend to get amnesia when that happens and claim the agent didn’t fully explain the policy. How do I know that happens? Because I also spent 30+ years as an adjuster and handled more than my share of claims with insureds who had amnesia after a claim occurred.

  3. I would also like you to elaborate on number 5. Several years ago I purchased a two-family property for approximately $30k. I was recently told it could sell for around $45k if I wanted to sell it today. The insurance company says replacement cost would be over $300k. What level of insurance would you consider adequate for this property and why?

    • Larry,

      Last year was in similar boat. I paid a little more for replacement cost which protects you the most. Cost was minimal maybe $50-80 per year per property. Bought a house for $3,000 started rehab had another $7,000 in it. Was I glad to have replacement cost when some bum set it on fire during rehab? Hell yea. Cashed a huge check that set me up financially for life. Spend the extra. Replacement cost is cost to rebuild and they cannot screw you with it. You would not want the adjustor to come back and say well you have $35,000 invested in the property so thats what actual cash value is and be left with nothing. Protect yourself the cost to get replacement cost is cheap compared to extra coverage included.

      I am a professional investor that had two catastrophic claims last year. It can and will happen if you own enough property.

      • Mike, thanks for the information! Kevin, after I read your article, I contacted my insurance broker and asked him how my premium would change if I did not have replacement cost coverage (what he called an ACV policy). He strongly advised me against it, but said that he would contact MetLife to see what they say.

      • Kevin Perk

        Mike,

        I guess since my properties are a bit more expensive it makes more of a difference to me and my cashflow.

        I am not looking for a huge payoff either. I just want the bank out of the way, the lot cleared and then I can move on.

        Thanks for reading and sharing your experience. It is appreciated and I do believe your point that at some time it will happen.

        Kevin

  4. Great post. Did you know that even a traffic ticket will raise your insurance policy premiums?

    Another lesson learned: If you file a claim and the insurance adjuster comes out to survey the damages, get it in writing and have them sign it. The spoken word and hand shake cost me over $10,000. I put all my rentals on replacement cost last year so there would be NO PROBLEMS. All of a sudden, the one that had a lot of damages wasn’t covered, even my insurance agent could explain why.

    • Kevin Perk

      James I know that well. I got dropped as a teenage for a “few” traffic tickets. Ask me how much my auto insurance was after that episode! I finally learned to slow down a bit.

      Good point you make about getting things in writing. We need to remember that insurance is a great thing. But insurance companies make their money in two ways, by not paying claims and by taking in premiums.

      They may not always be “on your side.”

      Thanks for reading and for commenting,

      Kevin

        • Kevin Perk

          James,

          Thanks for clearing that up.

          You are right that everything you do is looked at by insurance companies. They are looking at risk and if you take a lot of risks in your car I guess their thinking is that you are in general a risk to insure.

          Again I appreciate you commenting,

          Kevin

  5. Two personal lessons learned:
    1. When that major fire loss happens, have your trusted agent call the insurance company and negotiate on your behalf. If you arranged the insurance without an agent then hire a claims adjuster to call the insurance company. Your expense of hiring an expert will pay itself back when the claim is settled.
    2. You (or your property manager) should take care of the property’s smoke detectors. Don’t let the tenants do it. A property loss is bad enough but tenant injuries (or even deaths) are far worse. Fire investigators can frequently tell whether a smoke detector has been tampered with (especially when the battery compartment is empty). Besides, you’ll be changing those batteries during your regular property inspections. Yes, of course you’re doing regular property inspections.

    • In Texas you are not required to make sure the smoke detector is working once the tenants are moved in. You are not required to change the batteries or inspect it periodically. You only need to make sure it is working when the tenants move in. If the tenants complain that it is broken then you have to fix or replace it. If they don’t tell you it is their fault not yours. The tenants attest to this when they sign the lease which has a check box for “# smoke alarms installed and tested”. Based on your state you mileage may vary.

  6. This is a great article. I just reviewed my coverage with a new broker, I was way underinsured on a couple places.

    Also, my company(9-5) allows us to buy a $5M umbrella policy very cheaply. If you have a 9-5 see if its available, mine costs as about as much as a $3M from my broker.

    • Kevin Perk

      Chris,

      It is always good to review your coverage as your business grows and expands. It is very easy to let insurance slip through the cracks. Don’t do it. Sit down at least once a year with your insurance provider and discuss where your are and where you are going in your business. A good provider can be a huge asset to you.

      Nice tip as well, thanks for sharing.

      Thanks also for reading and commenting,

      Kevin

  7. When you bundle your coverage, have you ever ran into problems and had your auto policy dropped or rates increased due to an increase in your number of properties?

    • Kevin Perk

      Tom,

      Not yet. Our current broker is pretty good and has done a good job shopping around our needs to different providers. Plus we never make a claim and keep things very steady. So, so far so good.

      Thanks for reading and commenting,

      Kevin

  8. Kevin,
    I would like to advise you that getting replacement cost coverage should be done if available regardless if it cost extra. The money you will receive upon a once in a lifetime even such as a total loss fire or other damage is so much greater than the premium paid over the lifetime of paying. I had that decision last year to make and spent an extra $1200 on my properties as a whole worked out to be about $80 per property and was best money I spent. I had two fires and if I did not have replacement costs I would have gotten a lot less. Actual Cash value is depreciated value of the property. Also if you buy it cheap and something happens guess what they are using for value. These adjustors will take advantage of that.

    Also make sure to get insured for debris removal. They will pay up to set amount for tear down.

    In regards to bundling property you should have a separate policy for your rental properties and you house you live in. Bundle rentals into a commercial policy and bundle your house and autos into a personal. Keep them separate.

    Also make sure you have liability insurance of minimum $1,000,000 and depending on your equity position and how many you should consider more.

    • Kevin Perk

      Mike,

      I am not looking for a payday. I just want to be covered to get the bank out of the way and clear the lot and move on.

      As far as keeping policies separate, we have our properties in a company name and personal in our own name, but all with the same company so they consider it a bundle. So I guess you could say separate but bundled. :)

      Thanks for reading and commenting,

      Kevin

  9. I also recommend getting insurance in your company name not personal. If you have a blanket policy and something happens you can deed your other houses into fresh llc and get rates based on no claims. If claim is in personal name then you will face higher rates

      • Kevin Perk

        Hmmm….interesting suggestion but I have a feeling the insurance companies are a bit smarter than that. I think they are going to match up your name to any LLC or simply not insure a newly formed LLC. Remember they are all about minimizing risk and they tend to investigate the amount of risk they are taking on.

        Thanks for adding to the discussion,

        Kevin

        • Kevin,

          As stated before I just went through this on two total losses. Replacement cost is key. You do not want a negotiation on acv after the loss and it doesnt cost too much more per property. Also if you have properties inside llc and insured that way after a total loss you can move other properties to seperate llc and be fine. Keep the total loss property as is llc wise.
          Again I am not speaking as someone that researching but someone thats experienced two total losses in past twelve months due to seperate fires and one a few years back when a drunk driver slammed into my house and ran off.

          I have had total losses with acv and replacement cost and kicked myself for saving the extra few bucks on the acv policy. It can and will happen when you buy enough property……

  10. I would think that at some point you would start to self insure.

    If you took your premiums and added them up for a 10 year period, what would that come to?

    Now figure out if you could cover any building burning down with that amount. If you can self insure and put that money in an account/investment and make the money work for you.

    I would also make sure that i kept two separate entities (corporations). One for business and one for personnel. Keeping it separate is always a good idea and does not cost much.

    • Kevin Perk

      Tony,

      Self insurance is a long term goal. One I think every investor should look into.

      Keeping things separated like you say and as I suggested above to Mike is also a very good idea.

      Thanks for reading and commenting,

      Kevin

    • Self insurance should never be the goal. When you wake up to a kid that dies in a house fire inside one of your homes you will realize those things. I speak from experience on this. Even the biggest wall st firms hedge there bets and so should you. Insurance is that hedge. What happens if a tornado hits a region and destroys all of the homes including your 30 that were paid off giving you the invincible feeling……. Your investment would be gone.

      • Kevin Perk

        Different strokes for different folks Mike. One of the things that make real estate great are all of the various was to do it.

        You do make some very valid points and I appreciate the fact that you are speaking from experience and adding to the discussion. Your point of view and experience is something every real estate investor, myself included, should consider.

        Thanks again,

        Kevin

        • Kevin Perk

          Galya,

          I do not know the stats on that. I seem to recall some instances where extensive devastation from a hurricane of some similar disaster was passed off to a state fund, but do not quote me on that. Does anyone out there know or have an example?

          Thanks for reading,

          Kevin

  11. Help!!! Still looking for a commercial policy to cover 7 SFH’s. The ones that I have contacted all require 10 or more. Any help would be appreciated.

  12. Sara Cunningham on

    All good points. I have experienced several of the things you mentioned. We had a broker that had been to 3 different companies who issued policies then cancelled them within 30 days because we showed numerous claims. In fact of the 11 we had only 3 had been real claims, a fire in one and 2 properties that had to have new roofs due to hail storms. The rest were just enquiries but guess what they said it was a claim. We never got a cent on these. After a frantic week spending hours on the phone I managed to locate a company that would insure our properties. In the meantime I was praying that nothing would happen as we had no insurance. The company we use for auto and our personal home wouldn’t touch us either. I am glad though that we have separate companies after reading some of the above comments. If only I had known all this years ago. Hind sight us a wonderful thing.

    • Kevin Perk

      Sara,

      Yes, hindsight is a wonderful thing. I am sorry you had to learn the hard way. I hope by you sharing your experiences it will save some other investor the trouble.

      Thanks for reading and for commenting,

      Kevin

  13. Good article! I am a property casualty agent and I think you have some good points, although, some of these statements don’t apply to everyone. Not everyone has the cash flow to handle a $5000 deductivble, and if you have multiple properties in a small area, that means one hail storm could leave you with $10,000, $15,000, $20,000 or more just in deductibles. The same goes for carrying the ACV (actual cash value) coverage over full replacement cost. Ultimately, these decisions are best made by sitting with an agent you trust and reviewing the different price points. Then determining which is most suitable.
    For example – Replacement cost coverage might run $200 more a year, but if the roof would cost $15,000 to replace, you could be out of pocket the whole way with a $5000 deductible and ACV coverage. The $200/year in that case would be worth it even if it took a full 30 years for that claim. On a side note, the average homeowner files a claim about once every 7 years. That’s a good number to determine if the extra premium savings warrant the greater personal risk.

    • Kevin Perk

      Jon,

      I agree with what you say. Everyone has to decide for themselves what they want and/or can handle. Part of that is sitting down and talking with a trusted agent/broker and looking at the details you describe.

      Thanks for commenting,

      Kevin

  14. About two years ago I had damage from a bathroom leak in the unit above mine. My tenant informed me of the problem and said the upstairs owner was taking care of it. Great! Unfortunately, it wasn’t addressed immediately and the damage (to my recently renovated bath) worsened. (Fortunately, my tenant kept me informed – and I also contacted the Management company.) I called my insurance company, which had an adjuster there the next day. He met with my contractor and we arranged for the repairs. He then dealt with being reimbursed by the other insurance company. I then received my deductible. Unfortunately, I have since had to switch to a Commercial company. Fortunately, I have not had any claims. I have learned over thirty years that a good insurance company is critical. Also my tenants are informed that my insurance does NOT cover their personal property and they should buy a renters policy. However, I am covered for the cost of a hotel in case the unit is uninhabitable.

  15. I can’t say I agree with points 1 and 10. What’s the purpose of paying insurance for years and then not filing a claim for a legitimate loss because you fear getting dropped? Might as well not have insurance at all. While it may not be a good idea in the long-run to file certain small claims, there are plenty of legitimate claims short of a ‘disaster’ that are advisable to pursue. For example, a plumbing leak that results in damage your kitchen cabinets and tile floors. This is covered and you contracted for such coverage. Such claims should be filed in my opinion.

    Good advice overall though. Look forward to exploring more of your articles.

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