How would you properly insure your rental property?

2 Replies

I have my first property in KS City closing in a few weeks. I'm trying to shop for insurance so I first contacted my own insurance company and was given a quote for about $95/mo and covers pretty much everything except earthquake, sewage back up so I went and try to shop for a different one. I was looking here in the forums for insurance company recommendations and one company stood up so I went ahead and contacted them. I was then quoted for about $60/mo but the problem is they only want to do their basic coverage which doesn't cover water damage.

Any suggestion on what should I be getting as a coverage and why? I'm leaning towards more of my first quote since this is my first out of state investment but please tell me if I'm making the wrong decision.. Thanks!

@Ryan Santos without knowing what type of property you are trying to insure I will try to be thorough although I don't think it would make much difference if it was an SFH rental or multi-family. I personally, want to be insured for 'Replacement Value' or 'Replacement cost' that is the insurance company will actually replace what was there before. I typically do not do an 'Actual Cash Value' policy, although these policies are cheaper I don't like them because they take depreciation into account when paying out. So for example... if you need a new roof which costs $20K a 'replacement value' policy would cover it all however, an 'actual cash value' policy would perhaps determine that the roof was 10 years old and so you might only get $10K and you would have figure out the rest on your own.

In regards to the actual policy, I like to keep my deductible up around $5K since I will only use it for big items this helps keep my premium down, I also like to get as close to $1 million in liability coverage as possible. Additionally, I require my Tenant's to hold a $100,000 HO-4 (renters insurance) for liability. Lastly, once you get all that set up, I would highly consider umbrella insurance especially if you have multiple properties, it bolsters the liability part of not only your properties' insurance but of your personal home and auto as well - once the liability limits on these policies have been exhausted that is when umbrella insurance kicks in. 

I'm not an insurance professional but I am a real estate investor/manager; which ever route you decide I would just highlight that you are getting insurance for a reason and it defeats the point to have 'coverage' that will not cover you when you most need it or go with a company that is not stable to support your claim should you ever have one - Me personally, I'd rather pay a bit more for absolute coverage that to pay cheaper premiums and one day turn for help from my company only to realize that they won't.... but the premium was cheap. I hope this helps. 


@Alex R. Thank you so much!  I agree that I'd rather pay a little more to give me better coverage and I did verify that it covers replacement cost :) I appreciate your input on this Thank you again! :)

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