Weighing options with insurance on rental property (Houston Area)

3 Replies

Just got my first BRRRR property under contract. The property is in southern Brazoria County of Texas, which has a red hot market going on right now. Anyways, I received a few a quotes for insurance and there are a few options. I'd like BP's opinion on the pro's and con's of the options received.

Here is the response to my question of increasing the deductible to lower the premium.

Yes, increased deductible would be one way to lower. Also, you can go down to 85% of the replacement cost on the wind. Lastly, there is a coverage called "Increased Cost of Construction" that allows for an additional percentage of the building limit in order to pay for the increased cost to comply with building ordinances and laws. (If there's damage to the home, the policy will pay to give you back what you had, but you have to rebuild/repair to the current code and there's often an increased cost to do that. That's what this is for.) I quoted 25% but you can do, 5%, 10%, 15% or 25%. All of that can add up so I'll get you some options.

From what I've read, it sounds like Texas has higher that average insurance costs due especially on the coast. 

What type of insurance do others use on the Texas coast.

Looking forward to hearing some responses! 

Hi Cory L.!! Congrats on your property! I would definitely increase my deductible I find thats always a good way to save on premium (just make sure you have the monies put away if needed for a loss) I would not recommend going down on the replacement value...that is the monies that would be used to rebuild the property if a loss where to occur I hate to sound morbid but if there is a fire and everything is burned to the ground you want to make sure that there are enough funds to rebuilt the property to what it is now and get indemnified to how you are today. Here in California the building and ordinance limit is always 25% at least with Farmers (I'm a farmers agent) and its a good way to be able to lower the dwelling just a tad because you can count on those monies as well...hope this helps! :)

Thank you for the reply, Yenipher. The quotes that I received were based on an estimated replacement value (ERV) of $95,000 and for regular homeowners insurance, the premium is $450/year, for windstorm, the premium is $605/year. The deductible is 3%, which I'll keep saved. I'll only have around $45K in the property when it's all said and done and it'll fetch $850-$900 a month in rent. I'm just curious as to what options others are using to lower the premiums of their rental properties.

Well, those numbers look good to me but I am also a newbie investor, my strenght is insurance so I'll leave the forum open to more experienced investors
:)

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