I'm wondering if anyone can shed some light on the cost of insurance (hazard & fire, liability, sewer backup, loss of income, umbrella, etc.) that a landlord would pay for a rental property in Utah (Utah Valley to be specific). If that is too broad of a question can someone provide some resources or point me in the right direction?
Bonus question: What type of coverage do you have for your rental properties? And does that change if you are house hacking?
The cost of insurance depends on many things. One of the most important is the property itself and what options you choose. I always recommend purchasing replacement cost policies whenever possible vs an actual cash value policy. It does cost more but int the event of a fire you will be glad you did. The size deductible also has an impact on your monthly premium. The higher the deductible you chose the lower your monthly premium you pay. However if you have a claim you have to exceed your policy deductible before your insurance will kick in.
It also depends on if you are getting a residential policy or commercial. The way the policies are written are very different. Many commercial policies are very basic then you have to add in all your options. For a residential you want an "all risk" policy. Although many insurance companies are starting to not use this term anymore because it has caused them problems when trying to deny a claim. Essentially you want a policy that has to specifically exclude a peril (cause of loss) for it to not be covered. If it is not listed in the policy as not covered then it is covered. The other option is a named peril policy. You don't want this, (but it is cheaper) with this type of policy the damage you have has to be caused by something specifically included in the policy for coverage to apply.
In the end you need to determine exactly what your needs are. Find a good insurance agent. If you have multiple properties you may be able to "stack" your coverage just like you can with vehicles. What this means is if you have a liability claim at property "A" that exceeds property "A" coverage but you also have another $1,000,000 liability coverage for property "B" then your property "B" coverage kicks in after your property "A" coverage is exceeded. It basically acts like an umbrella. I have my properties stacked, then I have an additional liability umbrella on top of that.
Originally posted by @Michael Badin :
Find a good insurance agent.
This is key. But also shop shop shop. I have found similar coverages can be double from one agency to another. I have two clients who own Farmer's agencies who can't touch what I'm getting from State Farm.
Understand what you're paying for. Costs add up with high rebuild costs and go down substantially with higher deductibles. Higher liability is surprisingly inexpensive.
Earthquake insurance is also all over the map.
My strategy is to throw some of my portfolio at insurance sales people looking for business. This way I get fresh quotes from competitors periodically to make sure my current rates are competitive.
@Matthew Miles we live north of Utah Valley (county) in Weber county and have rental properties in both Davis and Weber counties. Our costs are anywhere from $25-$95 a month per property and we have everything from 1 bed condo/ small house to 4 plex properties.
We are with Farmers now, but have changed around over the years. I agree with @William Hochstedler that you should always be shopping around for best possible rates and coverage.
@Matthew Miles My guess is that if you are at the point you are taking your investment property serious enough to call it a business. You are asking all the right questions and like everyone said. Shop, Shop or find an insurance broker who will do this for you. @Michael Badin broke it down to the perfectly. Know what kind of policy you are getting. Older buildings sometimes face tougher underwriting than newer ones and can only get certain covearge unless certain updates are made. Also, the final word on rates is sometimes the lowest rate isn't always the best coverage. When you compare covearge ask..."What am I not getting for this lower rate."
Typically a DP-3 (Dwelling Policy) will be the closest to your HO-3 (Homeowners) Policy and a DP-1 will be a “named peril” policy. The DP-1 will be the cheapest and also have the most holes in your coverage.
Also nothing in Utah will cover flood except a policy from the NFIP/government.
You should always put a recommendation in your lease, that tenants get their own rental policy, because your policy will NOT cover their stuff. For many tenants adding a rental policy may actually drop their overall insurance cost if they already have car insurance, due to the bundling discounts.
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