Insurance is killing my rentals

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Insurance is killing my rentals

Hobart King
Financial Services · Birmingham, AL · Member since 2015 · 80 posts · 40 votes

Can someone tell me what a normal amount is to pay for Insurance on low end rental properties? I own two rental properties in a 50/50 partnership in Birmingham, AL. 

Rental 1: Market Value ~50k. Insurance Payments are $1,829/year and rent is $590/mo. 

Rental 2: Market Value - $120k. Insurance Payments are $2,244/year and rent is $1,100/mo. 

Carrying Fire insurance 70k on the first and 100k on the second. Personal Liability $1MM on each. 

Does this seem in line with market rates? I feel like this is an absolutely ridiculous amount of money to pay to fire, water backup, and liability insurance. What are other people paying? Anyone you guys would recommend?

No loans on either of these properties. Would it be better to just not have insurance and be out the money in the minuscule chance that these houses burn down? I can always get personal umbrella coverage to cover the liability I think. 

Thanks,
Hobie

14Reply
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Paul Brown
Investor · Member since 2020 · 26 posts · 52 votes
5y

I used to own an insurance agency. You need to find a broker that can shop for commercial rates. Stay away from the name brands Allstate, State Farm, Farmers, etc. they can do it but since they dont specialize in it they charge insane prices. Also you need to shop your insurance annually and a good commercial broker that works with multiple carriers can do that for you. 

36Reply
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  • Aaron K.
    Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
    5y

    @Hobart King that is insane but I don't know what is normal in your area in CA where houses face little danger from wind, hail, flooding etc. I'm at like $450 annually for $375k house, in TX I'm at like $650 annually for $175k house so I'd shop around because that is crazy.

    8Reply
  • Hobart King
    OP
    Financial Services · Birmingham, AL · Member since 2015 · 80 posts · 40 votes
    5y

    It absolutely is insane. In Alabama, the major danger is tornados but I don't even think that's covered in my policy. My personal property insurance is only ~$100 per month for a house that was around $400k and I'm paying more than double for houses that cost ~$100k to replace. Makes no sense

    4Reply
  • Richard Weinberg
    Rental Property Investor · Winston Salem, NC · Member since 2018 · 102 posts · 66 votes
    5y

    Not even close. My lowest policy is about $500 for a single family suburban house in North Carolina market value $150k, And highest is in florida for a $200,000 condo at $1200 plus. Call AAA start there and ask for referrals. Frankly, I think I am paying too much! LOL!

    Good luck,

    2Reply
  • Nadia O.
    Member since 2020 · 82 posts · 100 votes
    5y

    Switch to lemonade insurance. Your current ins is ripping you off. Our insurance was about $1600. That’s because we live by the beach. We need flood coverage. But then we transferred to lemonade & now only pay $700. My rental condo is only $300+/year with lemonade 

    15Reply
  • Paul Brown
    Investor · Member since 2020 · 26 posts · 52 votes
    5y

    I used to own an insurance agency. You need to find a broker that can shop for commercial rates. Stay away from the name brands Allstate, State Farm, Farmers, etc. they can do it but since they dont specialize in it they charge insane prices. Also you need to shop your insurance annually and a good commercial broker that works with multiple carriers can do that for you. 

    36Reply
  • Hobart King
    OP
    Financial Services · Birmingham, AL · Member since 2015 · 80 posts · 40 votes
    5y

    Lemonade is not in AL yet :(

    0Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    5y

    I would also make sure that your broker understands that these are rentals, not your personal residence and therefore aside from appliances, contents are not covered.

    3Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    5y

    @Paul Brown agree, however I have Farmers for my small apt bldgs and the rates were crazy low. But these are new builds so maybe that is why

    0Reply
  • Garrett Cannizzo
    Rental Property Investor · Elkhart, IN · Member since 2020 · 22 posts · 52 votes
    5y

    @Hobart King

    Are the properties held in a legal entity or owned by you personally? If held in an LLC you likely have a commercial insurance policy which is much, much more expensive than if the properties are owned by you personally. A really good insurance agent should be able to help you navigate this even if in a legal entity, but right now it seems like you are definitely overpaying. Also, consider a personal umbrella policy rather than having such a high limit on your liability insurance. I hope this helps!

    10Reply
  • Ryan Cleary
    Investor · Palm Beach County, FL · Member since 2019 · 370 posts · 330 votes
    5y

    @Hobart King

    That’s unreal. My property in New York about 300 yards from the ocean with a market price of 450k is about $700 a year in insurance.

    My duplex in Florida away from any flood zone with a market price of $220k is about $2,900 a year. What’s issue here?

    0Reply
  • Jill F.
    Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
    5y

    we pay 20-50/door / month

    4Reply
  • Raju V.
    Investor · Severna Park, MD · Member since 2016 · 32 posts · 39 votes
    5y
    Originally posted by @Hobart King:

    Can someone tell me what a normal amount is to pay for Insurance on low end rental properties? 

    I have some properties in Baltimore that are insured for $50,000. They are owned in a LLC with a $5,000 deductible and 1MM liability. And I am paying $23.50/mo. I use NREIG, they are national. I actually found them about 4 years ago on another thread on BP. They specialize with real estate investors. 

    7Reply
  • Nathan S.
    Rental Property Investor · West Palm Beach, FL · Member since 2020 · 15 posts · 10 votes
    5y

    @Paul Brown

    Hi Paul,

    Any suggestions for finding a broker that can shop commercial rates? Is Google the best bet?

    Thanks

    0Reply
  • Syed H.
    Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
    5y

    SFH's - $700-$1200/year

    Multis- $350-$500/unit/year (depends on the size of the building)

    2Reply
  • Jason CoryPro Member
    Real Estate Broker · Birmingham, AL · Member since 2018 · 264 posts · 381 votes
    5y
    Originally posted by @Hobart King:

    Can someone tell me what a normal amount is to pay for Insurance on low end rental properties? I own two rental properties in a 50/50 partnership in Birmingham, AL. 

    Rental 1: Market Value ~50k. Insurance Payments are $1,829/year and rent is $590/mo. 

    Rental 2: Market Value - $120k. Insurance Payments are $2,244/year and rent is $1,100/mo. 

    Carrying Fire insurance 70k on the first and 100k on the second. Personal Liability $1MM on each. 

    Does this seem in line with market rates? I feel like this is an absolutely ridiculous amount of money to pay to fire, water backup, and liability insurance. What are other people paying? Anyone you guys would recommend?

    No loans on either of these properties. Would it be better to just not have insurance and be out the money in the minuscule chance that these houses burn down? I can always get personal umbrella coverage to cover the liability I think. 

    Thanks,
    Hobie

    Call Tyler Watts at Nationwide & tell him to copy my policies. 

    The last couple I bought the rate went up. He underwrote it with a couple different companies & they were all the same. I think it was the vandalism portion (not positive) that went up. Whatever portion it was tripled inside the premium. 

    Every insurer increased with the riots. That's the reason they all gave. I was in the office listening to the conversations about why the rates increased. 

    I used to pay $60 per property pre riots. Now it's about $80 per property a month. 

    3Reply
  • Alexandre Marques dos Santos
    Rental Property Investor · Member since 2020 · 215 posts · 137 votes
    5y

    @Hobart King

    Not the expert, but seems high. Do you actually have the right policy?

    I have several properties in Texas, value from 220 k to 570k. The insurance varies from 550,00/year to 1200,00/year

    Be sure your policy covers most of the needs as a LANDLORD.

    Maybe u are on a flooding zone (i personally avoid flooding zones as they very expensive)

    Good luck

    2Reply
  • Kyle J.
    Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
    5y

    @Hobart King I agree with the others, sounds like a crazy high amount to pay for insurance on a rental (assuming there’s not something out of the ordinary).

    I will say, I don’t think you can “just not have insurance” and then “get personal umbrella coverage to cover the liability”. I believe you need an underlying insurance policy in order to get coverage from an umbrella policy. I have an umbrella policy, and that’s my understanding of how it works anyway.

    Definitely shop around though. I’m sure you’ll be able to beat those rates.

    Best of luck. 

    1Reply
  • Bernard B.
    Investor · Huntsville, AL · Member since 2012 · 50 posts · 50 votes
    5y

    @ Hobart King,

    Good evening. I have several rental properties in Huntsville, Al. Typically, a rental property valued at $40k, would cost around $600 per year. We use Farmer's( Foremost) insurance for our properties. If you check them out, be sure to tell them that you want to insure rental properties, and you could also possibly get a multiple property discount. It would not hurt also if you mentioned to them that you are a landlord/property manager. Good luck, hopefully, you will find some reduced annual rates. Also the property taxes should be reasonable in Alabama, if you feel that they are too high , you can always contest them with an appeal.

    0Reply
  • Grey Stone
    Investor · Palmdale · Member since 2016 · 112 posts · 80 votes
    5y
    Originally posted by @Nadia O.:

    Switch to lemonade insurance. Your current ins is ripping you off. Our insurance was about $1600. That’s because we live by the beach. We need flood coverage. But then we transferred to lemonade & now only pay $700. My rental condo is only $300+/year with lemonade 

    I love Lemonade Insurance (as a business), but I don't think they do insurance for landlords....do they?

    0Reply
  • Marc RiceBusiness Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
    5y

    @Hobart King

    Increase your deductible and it’ll decrease your insurance bill

    [email protected]614-363-2787
    Marc Rice | Investor Friendly Agent at Reafco Tailwind Team574 Reviews
    WebsiteView Page
    1Reply
  • Ryan Ruppert
    Investor · Seal Beach Ca · Member since 2020 · 19 posts · 8 votes
    5y

    I just bought a 200 k property in Huntsville AL and I pay $1070 per year for “100% replacement cost” quote with 1M worth of liability coverage. I could have gotten an even cheaper ins premium but my policy has higher coverage amounts.

    Try listening to the “Passive Real Estate Investing “ podcast with Marco Santerelli episode #20. It’s all about property insurance for RE investors. Might give you some insight into just exactly what you are paying fir with your current policies.

    Hope that helps

    Ryan

    4Reply
  • Sean Fillmore
    Member since 2020 · 20 posts · 9 votes
    5y

    I have an $80K rental in Wichita, KS and I’m paying $60 a month. The agent even added a couple of provisions that really benefitted me as a long distance investor.

    I would definitely shop that out to a couple other agencies.

    1Reply
  • Account Closed
    Rental Property Investor · Irvine, CA · Member since 2017 · 33 posts · 15 votes
    5y

    Sounds a bit high. I have $90k single family rental outside of Kansas City that I'm paying $550/yr on for insurance. Policy covers $1M liability, 6 months loss of rent, and at 100% replacement cost. Like others have said, I'd shop around. 

    3Reply
  • Stephen DeThample
    Real Estate Agent · Las Vegas, NV · Member since 2020 · 461 posts · 305 votes
    5y

    @Sean Fillmore who’s your agent? I’m looking for a property in Wichita.

    1Reply
  • Polo VazquezPro Member
    Real Estate Agent · McAllen, TX · Member since 2017 · 382 posts · 281 votes
    5y

    Hey! that is an insane amout to pay for insurance. At that point you are better of not paying it and by the time something happens (if it ever does) you would have so much more money. If you can't find cheaper insurance, I would just go by without it. Just keep a little more in reserves just in case.

    0Reply
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