Landlords want their rental property business to be protected, but they don’t want to crimp their cash flow or profits with burdensome premiums.
But saving money on insurance is more complicated than just shopping rates.
Here are some tips to help you secure the best policy for your rental business:
Shopping the Competition
Insurance laws — and rates — can vary from state to state, and from company to company, so it’s worth collecting some data and making an informed decision.
But the trouble with comparing quotes is the fact that you may be looking at apples to oranges, not apples to apples.
Insurance agent Ryan Slaughter, with American Family Insurance in Colorado, warns that shopping for the lowest premium is not always the most economical plan. “When I’m advising a client, it’s not just about premium price. It’s what’s being offered for that price.”
When shopping for a policy, make sure the minimal bases are covered:
Adequate protection for the structure;
Liability coverage for any injury claims; and,
Protection to hedge loss of rental income in case of forced vacancy.
Any one event, when not adequately covered, can cost far more than any premium savings.
Is Bundling A Good Option?
For some landlords, bundling is the only option. Last year, Allstate customers in North Carolina received notices that they were being dropped from coverage, unless they agreed to bundle their landlord insurance with their auto insurance.
However, for some landlords, the question is whether bundling is even an option.
Slaughter points out that American Family typically does not link landlord policies, because title to the rental properties often is not with the landlord individually, but with a separate LLC or corporation.
However, American Family may make an exception for properties built after 1950 with no prior claims history. A commercial landlord policy may be bundled along with the landlord’s personal auto policy, and that can bring the price down.
Limit Your Risks
To the extent that a landlord can take steps to reduce the likelihood of a claim, an insurance company may offer discounts. These will vary by company.
For instance, American Family may offer a 20% reduction in premium price for properties with overhead sprinklers. The company also offers discounts for membership in an apartment association.
Other possible discounts include installation of smoke detectors, or participation in a local crime-free certification program. When comparing rates, be sure to discuss possible discounts offered to get a more complete picture.
Slaughter also suggests that if a landlord must lower premium prices, rather than cutting coverage — which can be catastrophic — consider increasing deductibles to obtain the rate needed.
Tuck away the cost of the deductible to cover any unexpected losses, and keep your rental business profitable.
Ryan Slaughter is a JD Power Award Distinguished Agent with American Family and serves landlords in Colorado.
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