Insurance Costs Eating Into Deals Lately?

Question

Had a couple of deals almost fall apart recently once buyers got their insurance quotes back — premiums have jumped enough in Middle Tennessee that it's changing the numbers on some rentals and flips. Wondering if this is showing up as a bigger factor in other markets too, or if it's more of a regional thing tied to recent claims/weather trends.

Blake Ferguson · Answer

The insurance for my flips has nearly doubled in the last 3 years. Its frustrating, but they do have options where you can terminate if you're able rehab and sell quickly and before the term of the insurance. On the contrary, my rental dwelling premiums have not seemed to have changed much.

Vikram Battalapalli · Answer

Insurance broker here. This is real, not just a Middle Tennessee thing. It is showing up almost everywhere the last couple years, and weather and claims history are a big part of why.

It's because carriers got burned on wind and hail losses across the Southeast and Midwest, so they have been repricing and pulling back capacity. Middle Tennessee has actually seen more wind and hail claims than people expect, so underwriters are pricing that in now. Some carriers are also raising deductibles or switching from flat deductibles to percentage ones. That can hit your numbers harder than the premium bump itself, since it changes how much you actually collect on a claim.

It's usually better to get a real insurance quote before you are under contract, not after. And if I were underwriting a property, roof age and material would be on the top of the list of things to check. Happy to help if you want a second opinion on a quote that seems off.

Denise Supplee · Answer

Insurance has become a much bigger consideration than it used to be. From my experience, it's one of those expenses that can really change the numbers, so I always want to know what those costs look like before moving forward.

Insurance Costs Eating Into Deals Lately?

Insurance Costs Eating Into Deals Lately?

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