Understanding Landlord Insurance Costs: How to Get the Best Rates

For many landlords, especially first-timers, the cost of insuring their building may seem mysterious. Why are landlord insurance costs so different from their homeowner’s policy? Why is the rate so different from the seemingly identical building next door?

And, most importantly, what is a good price? What should landlord insurance cost? What can landlords do to lower those costs?

The questions may be simple, but the answers will differ for every building and landlord.

“What should landlord insurance cost?” is similar to asking, “What should a car cost?” Shopping for a used Toyota Corolla is very different from looking at a new S-class Mercedes Benz.

Similarly, a five-story building in the Bronx will cost much less to insure than a Brooklyn brownstone steps away from Prospect Park. Even similar buildings on the same block can have very different insurance needs and costs.

Key Factors Affecting Landlord Insurance

Insurance companies consider several factors when pricing insurance. Here are the major ones:

• Premiums for similar policies can vary widely by company. Some companies, for example, specialize in different types of homes, such as waterfront or historic properties. Insurers also may offer aggressive pricing in certain areas to gain market share. Insurance firms can also raise prices to discourage certain types of properties.
• The amount and scope of coverage is a major factor when it comes to premiums. So are riders and other add-ons, such as loss of rental income, flood or earthquake coverage, and other options.
• Location, age and type of building greatly affect landlord insurance premiums. Because premiums are partially based on the cost to rebuild a property, construction and materials are a big factor. A historic property with exotic materials or intricate woodwork will be expensive to rebuild.
• From an insurer’s point of view, an apartment building with retail space on the first floor carries different risks than an identical building without retail space.

Insurance offers protection against financial catastrophe. As a result, insurance needs vary, depending on the financial situation of the building owner. A property owner with substantial assets to protect, for instance, should strongly consider additional liability coverage and/or an umbrella policy. A landlord who depends on monthly rental income should have a rider that provides Loss of Rents protection.

An additional note: Many insurers look at a landlord’s credit rating when deciding whether to offer a policy and when setting premiums. A lower credit rating can mean higher premiums.

Tips for Reducing Landlord Insurance Costs

Talk to your agent/broker about relatively quick and easy fixes you can make to lower your insurance premium. Depending upon the company and the policy, those fixes may include:

• Catching up on regular property maintenance, even such minor tasks such as replacing lightbulbs, cleaning walkways, and installing automatic door closers.
• Installing safety features, even if not required by law, such as security cameras.
• Replacing outdated or older equipment near the end of its useful life.

An experienced insurance partner can help you present your property in the most favorable light, which will help you qualify for the most attractive rates.

How to Get the Best Landlord Insurance Rates

Getting multiple bids is considered standard procedure for construction and maintenance projects. The same is true for getting the right insurance coverage at the best price. The quickest and easiest way to do that is to consult an insurance broker who knows the area and the companies where your building is located. A broker who regularly works with multiple companies can be an invaluable resource.

If you have any questions about insurance or your current insurance policy, or would like a free insurance review, please call us at 877-576-5200.