{"id":158231,"date":"2023-09-15T10:29:03","date_gmt":"2023-09-15T16:29:03","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=158231"},"modified":"2024-02-29T18:01:56","modified_gmt":"2024-03-01T01:01:56","slug":"ways-to-lower-cost-of-landlord-insurance","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/ways-to-lower-cost-of-landlord-insurance","title":{"rendered":"Landlord Insurance is Getting Expensive\u2014Here’s 7 Ways to Reduce Your Bill"},"content":{"rendered":"\n

As a property owner, you understand the importance of safeguarding your rental investments. <\/span>Landlord insurance<\/span><\/a> offers invaluable protection against potential financial setbacks associated with rental properties, allowing you to protect yourself and your rental property business.<\/span><\/p>\n\n\n\n

In this article, we’ll walk you through the average cost of a landlord insurance policy, as well as seven simple, effective strategies you can take on to help you lower your annual insurance premiums.<\/span><\/p>\n\n\n\n

Why is Landlord Insurance Important?<\/span><\/h2>\n\n\n\n

Landlord insurance is not mandatory<\/span><\/a>, yet many homeowners are unaware of the <\/span>benefits associated with it<\/span><\/a>. The first thing you need to do to make sure you’re protected if something goes wrong with your rental property is to get the right kind of insurance. <\/span><\/p>\n\n\n\n

Related: <\/span><\/em><\/strong>What Is Rental Property Insurance & Do Landlords Need It?<\/span><\/em><\/strong><\/a><\/p>\n\n\n\n

Instead of regular homeowners insurance, you should switch to landlord insurance. When buying your landlord insurance policy, there are a number of actions you can personally take to lower the cost of premium you pay.<\/span><\/p>\n\n\n\n

Insurance companies <\/span>consider many factors<\/span><\/a> while determining the <\/span>cost of landlord insurance premiums<\/span><\/a>. They also ensure that a building complies with existing construction rules. Whether you’re a seasoned landlord or just starting in the rental business, these tips will help you make the most out of your insurance policy without breaking the bank.<\/span><\/p>\n\n\n\n

What is the Average Cost of Landlord Insurance?<\/span><\/h2>\n\n\n\n

Landlord insurance costs around <\/span>25% more than homeowners insurance<\/span><\/a>. For instance, if homeowners insurance is $1,800, landlord insurance on the same house would be approximately $2,200 to $2,230 when used as a rental. <\/span><\/p>\n\n\n\n

A landlord can add up an insurance premium to the total insurance cost, which accounts for the operating expenses of the rental property. This premium is deducted from the rental income landlords receive from a tenant.<\/span><\/p>\n\n\n\n

In 2023, some of the states with the highest landlord insurance premiums were Louisiana, Florida, Texas, and Colorado. <\/span>This interactive map of the United States<\/span><\/a> shows the average cost of landlord insurance in many states. <\/span><\/p>\n\n\n\n

What Are the Landlord Insurance Types?<\/span><\/h2>\n\n\n\n

Landlord insurance policy comes in three types, each with different policies and costs. These are called dwelling policies.  <\/span><\/p>\n\n\n\n

Dwelling Policy 1 (DP-1)<\/span><\/h3>\n\n\n\n

This landlord insurance policy<\/span><\/a> is very cheap and offers limited coverage. It only includes the protection for specifically listed risks. <\/span><\/p>\n\n\n\n

Suppose your home gets damaged by a <\/span>hurricane<\/span><\/a>. If you haven’t named this natural disaster in your policy, you can’t file a claim for the resulting property damage. However, reimbursements can be made depending on the actual cash value, which is the total damage cost, excluding wear and tear.<\/span><\/p>\n\n\n\n

Dwelling Policy 2 (DP-2)<\/span><\/h3>\n\n\n\n

This type<\/span><\/a> covers many elements and is more expensive than DP-1. Still, you need to mention the exact risks in the policy. In addition, you’ll be paid out on a replacement cost basis, meaning that no amount will be deducted for wear and tear.<\/span><\/p>\n\n\n\n

Dwelling Policy 3 (DP-3)<\/span><\/h3>\n\n\n\n

This type of insurance<\/span><\/a> is costly but has the most extensive dwelling policy coverage. It covers all the risks, either mentioned or not, except those you specifically exclude from the policy. Like the DP-2 policy, you’ll also get reimbursements on a replacement-cost basis.<\/span><\/p>\n\n\n\n

Tips for Lowering the Cost of Landlord Insurance<\/span><\/h2>\n\n\n\n

Landlord insurance costs are determined based on a number of factors both within and outside your control, including claims history, replacement cost, construction type, housekeeping, exposures, and occupancy. These seven factors are within your control and will enable you to get a lower quote on landlord insurance. <\/span><\/p>\n\n\n\n

1. Property maintenance<\/span><\/h3>\n\n\n\n

It\u2019s important to keep your property attractive to insurance companies and potential tenants. This is referred to as \u201cpride of ownership.\u201d Watch out for any wear and tear or minor damages in your home, and perform regular maintenance checks to help you identify hidden cracks. <\/span><\/p>\n\n\n\n

Keep the sidewalks well maintained, and ensure fire escapes and smoke detectors are functional. Get rid of any pest infestation or mold detected in any corner of the home. The key is to act immediately to show the insurance company it has a low risk of damage.<\/span><\/p>\n\n\n\n

A best practice is to ensure that your property has these essentials:<\/span><\/p>\n\n\n\n