what should I expect to pay for insurance for single family
Rental Property Investor · Galesburg, MI · Member since 2018 · 13 posts · 3 votes
hello bp I hope everyone is having a great day. I have a single family 2 bed 1 bath that a wholesaler has brought to me. It meets the 1% rule at about 1.5%. All the other numbers are working in the calculators, except I'm basically guessing on insurance. I was wondering if there is a rough idea of what I should budget for without having to get a quote from my insurance company. As you can tell by the question I am relatively new to this. The home is located in kalamazoo, mi it is city certified and has a newer roof, there is a tenant in place, its turn key but is under market value. Im just curious how other investors come up with a number to run for analyzing? Any advice is appreciated, thank you for reading.
-Chris
Chris,
I have posted this info before but I thought it was worth reposting as it may help you when you are quoting this new property:
Below are some general items of information that will help in your process:
Here are some things to lookout for from an Insurance prospective:
1. Any in-ground tanks (active or inactive)
2. Any Knob & Tube or Aluminum Wiring
3. If built before 1978, does the building have Lead Safe certifications
4. Any wood stoves or secondary heating units. If so, were permits pulled
& were they installed by a professional
5. Are any of the homes rented to students
6. Is there a flat roof
7. Are there asbestos shingles
The Year that the following were updated (either partially or fully) would be good to know:
- Heating systems
- Roof
- Plumbing
- electrical
Some companies will not write properties with systems that have not been updated.
As long as you are living there, the proper policy for a 1-4 family is a "Homeowners" policy . If the property is solely tenant occupied you will be looking for a Dwelling/Fire Policy (may be called a Landlord policy or similar name) or a commercial policy such as a Businessowners or Package policy.
Most homeowers or dwelliing/fire policies include:
1.Dwelling (Building coverage)
The limit should be based on the Replacement Cost of the building (cost to rebuild with
the same kind and quality excluding the foundation)
2.Contents (Personal Property): most homeowners policies give a set % of the Building
limit for Contents. Dwelling/Fire policies requrie that you request a limit for conents.
3.Detached Structures: for other buildings on the property (ie. sheds & detached garages)
Again, there is normally an included limit of 10% of the building limit. That can be increased
if needed.
4. Loss of Use / Loss of Rents: Normally, there is a 20% included limit. Loss of use is for
your additional expenses if you can not live there due to a covered claim (ie. Fire). The
Loss of Rents is for the loss of Rental income if the tenants can not occupy the house
after a covered loss.
5. Personal Liability: For claims due to Bodily Injury or Property Damage that you become
Liable for and which is covered under the policy. Companies normally offer limits up to
$500,000 but some offer $1,000,000. Buy the max.
6. Medical Payments: Provides coverage for an injury suffered on the premises. Does not
require proof that you were at fault. Used to keep small loses into becoming lawsuits.
Normally offered up to $5,000 but check to see if higher limits are available.
7. Deductible: This is not a coverage but rather your portion of a claim. Most better policies
will not have a deductible for either the Liability or Medical payments coverage. It will
apply to the other 4 coverages. You can select the amount of the deductible, usually
ranges from $500 to $5,000. The higher the deductible the lower your overall premium
but get quotes on all the deductibles you are interested in. Sometimes the incremental
savings from $1,000 to $2,500 or from $2,500 to $5,000 are too small to make the higher
deductible worthwhile. ***depending on how far the house is from the coast, you may
also be required to have a separate Wind or Hurricane deductible. Most times, the
deductible will be 2% to 5% of the building value. That is a significant amount
(on a $500,000 building that comes to $10,000 for 2% or $25,000 for 5%). A policy
with a higher premium may be a better deal if it does not have a wind deductible.
There are many endorsements that are available on the homeowners policy. Without
knowing the details I cannot suggest which would be right to add on.
Several you should pay attention to are:
- Ordinance & Law: Provides additional building coverage to deal with rebuilding cost
Increases due to changes in Zoning or Building laws
- Personal Injury Liability: Libel, defamation of character, wrongful imprisonment, etc.
(normally recommended, especially if you are a landlord)
- Water Backup: For water damage due to the backup of Sewers or Drains.
- Personal Articles: Coverage for belongings that have a special or collectors value
such as Jewelry, Furs, Fine Arts, Collectibles, etc...
Your age should not be a factor on the pricing but, depending on the company these other factors may get you credits:
- Insurance Score (company pulls certain info out of your credit report)
It is not your credit score but generally better credit will result in a better score
- Time at your job
- Education level
- time at current residence
- Claim history
@Chris Fayling I get this question from new and experience investors all the time. Would be happy to help you with what you need.
-Matt
hello bp I hope everyone is having a great day. I have a single family 2 bed 1 bath that a wholesaler has brought to me. It meets the 1% rule at about 1.5%. All the other numbers are working in the calculators, except I'm basically guessing on insurance. I was wondering if there is a rough idea of what I should budget for without having to get a quote from my insurance company. As you can tell by the question I am relatively new to this. The home is located in kalamazoo, mi it is city certified and has a newer roof, there is a tenant in place, its turn key but is under market value. Im just curious how other investors come up with a number to run for analyzing? Any advice is appreciated, thank you for reading.
-Chris
Chris, I would suggest getting a formal quote on this location, then using that estimate as your # going forward. A SFR by itself will most likely be written through a personal lines product, which does have some of it's rate based on your credit history.
If you don't want to do the above, Foremost will insure a $100k building for around $500 per year.
thank you @Jasonbott I was guessing more than double that. The house at full market value would be around $65k so hopefully I can get it insured for around that $500 range and it will cashflow even better.
Chris,
I have posted this info before but I thought it was worth reposting as it may help you when you are quoting this new property:
Below are some general items of information that will help in your process:
Here are some things to lookout for from an Insurance prospective:
1. Any in-ground tanks (active or inactive)
2. Any Knob & Tube or Aluminum Wiring
3. If built before 1978, does the building have Lead Safe certifications
4. Any wood stoves or secondary heating units. If so, were permits pulled
& were they installed by a professional
5. Are any of the homes rented to students
6. Is there a flat roof
7. Are there asbestos shingles
The Year that the following were updated (either partially or fully) would be good to know:
- Heating systems
- Roof
- Plumbing
- electrical
Some companies will not write properties with systems that have not been updated.
As long as you are living there, the proper policy for a 1-4 family is a "Homeowners" policy . If the property is solely tenant occupied you will be looking for a Dwelling/Fire Policy (may be called a Landlord policy or similar name) or a commercial policy such as a Businessowners or Package policy.
Most homeowers or dwelliing/fire policies include:
1.Dwelling (Building coverage)
The limit should be based on the Replacement Cost of the building (cost to rebuild with
the same kind and quality excluding the foundation)
2.Contents (Personal Property): most homeowners policies give a set % of the Building
limit for Contents. Dwelling/Fire policies requrie that you request a limit for conents.
3.Detached Structures: for other buildings on the property (ie. sheds & detached garages)
Again, there is normally an included limit of 10% of the building limit. That can be increased
if needed.
4. Loss of Use / Loss of Rents: Normally, there is a 20% included limit. Loss of use is for
your additional expenses if you can not live there due to a covered claim (ie. Fire). The
Loss of Rents is for the loss of Rental income if the tenants can not occupy the house
after a covered loss.
5. Personal Liability: For claims due to Bodily Injury or Property Damage that you become
Liable for and which is covered under the policy. Companies normally offer limits up to
$500,000 but some offer $1,000,000. Buy the max.
6. Medical Payments: Provides coverage for an injury suffered on the premises. Does not
require proof that you were at fault. Used to keep small loses into becoming lawsuits.
Normally offered up to $5,000 but check to see if higher limits are available.
7. Deductible: This is not a coverage but rather your portion of a claim. Most better policies
will not have a deductible for either the Liability or Medical payments coverage. It will
apply to the other 4 coverages. You can select the amount of the deductible, usually
ranges from $500 to $5,000. The higher the deductible the lower your overall premium
but get quotes on all the deductibles you are interested in. Sometimes the incremental
savings from $1,000 to $2,500 or from $2,500 to $5,000 are too small to make the higher
deductible worthwhile. ***depending on how far the house is from the coast, you may
also be required to have a separate Wind or Hurricane deductible. Most times, the
deductible will be 2% to 5% of the building value. That is a significant amount
(on a $500,000 building that comes to $10,000 for 2% or $25,000 for 5%). A policy
with a higher premium may be a better deal if it does not have a wind deductible.
There are many endorsements that are available on the homeowners policy. Without
knowing the details I cannot suggest which would be right to add on.
Several you should pay attention to are:
- Ordinance & Law: Provides additional building coverage to deal with rebuilding cost
Increases due to changes in Zoning or Building laws
- Personal Injury Liability: Libel, defamation of character, wrongful imprisonment, etc.
(normally recommended, especially if you are a landlord)
- Water Backup: For water damage due to the backup of Sewers or Drains.
- Personal Articles: Coverage for belongings that have a special or collectors value
such as Jewelry, Furs, Fine Arts, Collectibles, etc...
Your age should not be a factor on the pricing but, depending on the company these other factors may get you credits:
- Insurance Score (company pulls certain info out of your credit report)
It is not your credit score but generally better credit will result in a better score
- Time at your job
- Education level
- time at current residence
- Claim history
I would not hold a good deal because you don't have the exact number on an insurance quote. There are many other factors that are unknown and even with more risk such as vacancy costs, etc. Call an insurance broker, he will tell you a rough estimate on the phone without much details. Then you can crunch the numbers with whatever you choose. Keep in mind that insurance costs vary depending on coverage of course, so if you don't have an LLC set up, have some buffer and get a good insurance for liability, etc. If your deal is good, I don't think $50 extra bucks a month will be a deal breaker.
@Chris Fayling It's going to depend on a lot of factors that @John Mocker pointed out but it will also depend on whether you are getting replacement or market value coverage. You'll want to give some thought to which is best for you.
Ballpark in kalamazoo I usually shoot for somewhere in the 120 - 180 range / mo (obviusly this depends on the value of the building and some other factors but I think I might know what deal you are looking at and it could be potentailly lower) if you are looking for an affordable insurance guy ive had some success in the past and can point you in the right direction if you PM me.
Thank you gentleman! All very good information.