{"id":170323,"date":"2024-04-08T13:42:34","date_gmt":"2024-04-08T19:42:34","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=170323"},"modified":"2024-06-27T11:42:08","modified_gmt":"2024-06-27T17:42:08","slug":"growing-home-insurance-costs-will-hurt-cash-flow","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/growing-home-insurance-costs-will-hurt-cash-flow","title":{"rendered":"Growing Home Insurance Costs Will Destroy Your Cash Flow\u2014Here&#8217;s What You Can Do About It"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC5332200019\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p><span data-preserver-spaces=\"true\">Real estate investors are usually most concerned about rental income and property taxes. They seldom discuss home insurance. Many assume that home insurance is a standard fixed price in most parts of the country and give it scant regard, but you could be making a big mistake if you are one of those people.&nbsp;<\/span><\/p>\n\n\n\n<p><a class=\"editor-rtfLink\" href=\"https:\/\/www.insurance.com\/home-and-renters-insurance\/home-insurance-basics\/average-homeowners-insurance-rates-by-state\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">According to insurance.com<\/span><\/a><span data-preserver-spaces=\"true\">, the average cost of home insurance nationwide hovers around $2,800 per year, which equates to $231 monthly for $300,000 in dwelling coverage and liability and a $1,000 deductible. However, this number fluctuates throughout the country. As a real estate investor, it&#8217;s important to note that the numbers quoted are for owner-occupied homeowners insurance.&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/ways-to-lower-cost-of-landlord-insurance\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Landlords<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;should add another 25%.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Unsurprisingly, the states with the biggest risk of&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/safest-and-least-safe-real-estate-markets-from-natural-disasters\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">natural disasters<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;(hail, storms, tornadoes, flooding) have the highest insurance rates. The insurance.com data says the top five most expensive states for home insurance\u2014where average rates range from $4,142 to $5,317 per year\u2014are:<\/span><\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Oklahoma<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Kansas<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Nebraska<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Arkansas<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Texas<\/span><\/li>\n<\/ol>\n\n\n\n<p><span data-preserver-spaces=\"true\">The insurance.com data reveals that the five states with the lowest home insurance rates\u2014where rates range from $582 to $1,551\u2014are:<\/span><\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Hawaii<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">California<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Washington, D.C.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Vermont<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">New Hampshire<\/span><\/li>\n<\/ol>\n\n\n\n<p><span data-preserver-spaces=\"true\">Perhaps the most surprising state on the list of low insurance rates is Hawaii. However, don&#8217;t be fooled. Hawaii is so cheap because it excludes damage from hurricanes. That&#8217;s why, as a landlord,&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/how-to-read-your-property-insurance-policy\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">reading the fine print of what your policy does and doesn&#8217;t cover<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;is so important.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Although weather is the most important factor in determining your insurance rate, other things to consider include population density, proximity to potential areas of risk such as woodlands (<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/how-to-fireproof-your-home-from-wildfires\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">wildfires<\/span><\/a><span data-preserver-spaces=\"true\">), rivers, and busy roads, or conversely, proximity to fire hydrants and fire departments. The historical risk for claims in your area could also affect insurance.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">How a Landlord Can Lower the Cost Of Insurance<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">There are things landlords can do to keep the necessary cost of insuring properties as low as possible, including the following.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Ensure your property is well-maintained<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">Regular maintenance will ensure that cracks, leaks, faulty smoke alarms, mold, and infestations are spotted early and taken care of.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">In addition, make sure your property has these features:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Closed fire doors<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Well-lit hallways<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Clear, clean walkways<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Functional fire escapes&nbsp;<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">A strong roof and foundation<\/span><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Increase your deductible amount<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">Increasing your deductible (the amount you have to pay before your insurance kicks in) lowers your landlord insurance premium costs and prevents unreasonable claims. By saving money on your premium, you can purchase additional insurance against other claims.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Emphasize safety<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">An insurance company rewards landlords who take safety seriously. Make sure you emphasize:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Security cameras<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Interior and exterior lighting<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Alarm systems<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Smoke and CO2 detectors&nbsp;<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Connected smart security devices<\/span><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Upgrade your property&#8217;s main systems<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">Many insurance claims come from faulty main electrical, plumbing, and heating systems. Ensuring that your system is regularly checked and has been upgraded with modern systems (provide as much information as possible so insurers can verify) helps you get better pricing when it comes time to renew your policy.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Get a master landlord policy<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">If you have a sizable portfolio, getting all your properties insured under a single policy ensures better premium rates. A master landlord insurance policy also means less paperwork and monitoring of multiple individual policies.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Shop around<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">You&#8217;ll be surprised just how much insurance quotes can differ. Dedicate some time to shopping around. Go online, ask other local landlords which companies or brokers they use, and get multiple quotes.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Insurance Coverage Types for Landlords<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">As a landlord, these are some things you&#8217;ll need to consider including in your policy:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong><span data-preserver-spaces=\"true\">Rental property insurance:&nbsp;<\/span><\/strong><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/homeowners-insurance-complete-guide\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Rental property insurance<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;is standard for landlords and bundles liability, hazard, and loss of income insurance.<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Sewer and water line backup:&nbsp;<\/span><\/strong><span data-preserver-spaces=\"true\">Some utility\/water companies might offer to include this in your monthly bill. However, it&#8217;s worth having this written into your insurance policy because if your main water or sewer line breaks, the cost to repair it can run into tens of thousands of dollars.<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Flood insurance:&nbsp;<\/span><\/strong><span data-preserver-spaces=\"true\">If you&#8217;re in a designated flood zone, this is an extra expense you won&#8217;t be able to let float by. (In short, don&#8217;t buy in a flood zone.)<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Loss of income coverage:&nbsp;<\/span><\/strong><span data-preserver-spaces=\"true\">If your apartment is rendered uninhabitable due to a natural disaster, loss of rent insurance will cover the lost rent. Some landlord policies include this as standard, but it&#8217;s optional for others. Understand, however, that loss of rent insurance does not cover a tenant&#8217;s inability to work (through illness or other) and thus not pay rent. Expect to pay around one-third to one-half of the total premium for a landlord insurance policy, so consider this carefully in your overall calculations.&nbsp;&nbsp;<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Tenant rent default insurance:&nbsp;<\/span><\/strong><span data-preserver-spaces=\"true\">If you can afford this, it might help you sleep better at night. Also known as rent guarantee insurance, this insurance protects landlords from tenants who skip out on paying the rent, keeping your cash flow steady and your blood pressure low.<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Pet insurance:&nbsp;<\/span><\/strong><span data-preserver-spaces=\"true\">Pet-friendly rental properties are in high demand, and if you want to be competitive, this is something you&#8217;ll want to offer, too. If your tenant&#8217;s pet attacks another tenant in your building or damages your apartment, you want to ensure you are covered. Ensuring your tenant has pet coverage in their renter&#8217;s insurance is one way to go about that. However, local landlord-tenant laws differ from state to state, and you&#8217;ll need to check the most cost-effective form of protecting yourself when pets are in your building.<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Umbrella insurance:&nbsp;<\/span><\/strong><span data-preserver-spaces=\"true\">This is often overlooked by landlords who are concerned with their bottom-line&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/rental-property-cash-flow-analysis\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">cash flow<\/span><\/a><span data-preserver-spaces=\"true\">. However, umbrella insurance can be a godsend if you have the margins. It&#8217;s secondary insurance coverage to protect you once the limits on your standard liability policy have been exceeded. It&#8217;s especially helpful should you face lawsuits, expenses related to medical attention, and lost wages.<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Final Thoughts<\/span><\/h2>\n\n\n\n<p><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/what-is-a-landlord\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Being a landlord<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;is fraught with potential pitfalls. You are at the mercy of the weather and human beings\u2014two unreliable commodities. In your quest for profitability, you must pay attention to possible problems that could leave you penniless. Factoring in worst-case scenarios and ensuring you have the right insurance policy for your investments is crucial.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">As you scale, you&#8217;ll need to modify your insurance. Time is the great equalizer in real estate, and staying in the game is half the battle. Should you hold on to your assets, over time, your profits will increase, so if you have to spend a little more on insurance at the cost of your cash flow in the short term, it&#8217;s wise to consider doing so to ensure you can live to fight another day and increase your profits in the long run.<\/span><\/p>\n\n\n\n    \n  <div id=\"visibility-group-block_756cedb027080930f8919921a52bada1\" class=\"visibility-group  hidden\">\n        \n\n<div id=\"hero-block_1bf255a3a10928eb224ef9862d402c8e\" class=\"first:mt-0 hero-block py-4  alignwide   has-background has-theme-gold-light-background-color has-text-color has-theme-gold-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-theme-gold-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Get the Best Loan Today<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:16px\">Find trusted, <em><strong>investor-friendly<\/strong><\/em> lenders who specialize in your strategy. <\/p>\n\n\n\n<p><\/p>\n\n\n\n<div id=button-custom-event-block_1b04c2f74d0c7c626198002e2acd7ace class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/business\/finder\/lenders\" x-on:click=\"window.analytics.track(&#039;Blog Block | B2C Marketplace Lender Finder&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/growing-home-insurance-costs-will-hurt-cash-flow&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-gold-background-color has-text-color has-white-color\" target=\"_blank\">Find a Lender<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\" first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/Marketplace-Blog-Blocks-Lender-v3.png\" alt=\"investor friendly lender, investor friendly real estate loans\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n  <\/div>\n  \n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n    \n  <div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n        \n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<h3 class=\"wp-block-heading my-0 tracking-tight font-extrabold has-theme-slate-dark-color has-text-color has-large-font-size\">Join the community<\/h3>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more. <\/p>\n\n\n\n<div id=button-custom-event-block_64dd2888dba9e class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/signup\" x-on:click=\"window.analytics.track(&#039;Blog Block | Acquisition | Free Membership Signup&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/growing-home-insurance-costs-will-hurt-cash-flow&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Sign Up<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n            <\/div>\n<\/div>\n\n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n  <\/div>\n  <\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Real estate investors are usually most concerned about rental income and property taxes. They seldom discuss home insurance. Many assume that home insurance is a standard fixed price in most [&hellip;]<\/p>\n","protected":false},"author":613725,"featured_media":170326,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8,7119],"tags":[],"class_list":["post-170323","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-trends","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/170323","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613725"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=170323"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/170323\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/170326"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=170323"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=170323"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=170323"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}