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Where Landlord Insurance Premiums are Rising Nationwide

Finding the appropriate, reasonably priced insurance coverage for rental properties can be a challenge for landlords. Landlords need to meet certain requirements to get a mortgage, but they also want to make sure their investments are protected financially in case something bad happens. Insurance coverage for rentals also must be tailored to the individual property.

The insurance industry hasn't always given landlords and property managers the best options, especially tech-savvy investors. In this article, we will examine the causes of skyrocketing insurance premiums and three types of policies that help landlords reduce their insurance premiums.

Rising insurance premiums for landlords

Landlords are seeing the cost of their insurance premiums increase in the last couple of years. The average filed premiums for personal property insurance have increased by approximately 8% since January 1, 2021(1). The increases in property insurance premiums have been higher since 2022 Q2, implying that many landlords may face even higher premiums in the future.

The states of Illinois, New Mexico, and Louisiana saw the sharpest increase in property insurance premiums with 22.7%, 20.2%, and 17.8% respectively. While Washington (9.7%), Maine (10%), and California (10%) may not be as severely hit, the rise was sharp enough to make several landlords and property owners uncomfortable.

Most landlords and rental property owners chalk it down to lax tenant policies and damage liabilities in case a tenant breaks a lease or stops paying rent. But what’s causing property insurance premiums to increase?

States with most significant increase in landlord insurance premiums nationwide

The reasons for rising property insurance premiums for landlords

There are three factors contributing to the gradual rise in property insurance premiums.

Increase in natural disasters

Property insurance rate hikes can be majorly attributed to the growing number and severity of natural disasters across the country. More than half of all homeowner claims are the result of losses brought on by strong wind events such as hurricanes and tornadoes, hail, and weather-related water damages caused by floods(2). Losses from natural disasters around the world added up to $116 billion in 2021 alone, with 68% of those dollars coming from North America(3).

Another 2021 report forecasts global property insurance premiums to reach $183bn by 2040(4). That’s almost a 22% jump. The report lays the blame squarely on increasing climate change-related natural calamities like floods and wildfires combined with rapid urbanization.

They also have an indirect effect because these things raise the price that insurance companies have to pay to buy reinsurance.

Rising inflation

With the cost of construction increasing due to ballooning inflation, property owners are finding themselves paying more for their buildings. Construction-related costs come from several sources, including the need for more materials, labor, and increased building expenses. With construction spending at an all-time high, many employers are investing in their properties as long-term investments that can contribute to retirement savings.

To help offset these costs, insurance companies have been forced to raise premiums recently.

Increased risk of lawsuits due to tenant disputes

In the past, landlords were able to avoid liability for any claims made by tenants. Due to the increase in tenant-landlord disputes, insurance companies were forced to increase their premiums for landlords. Tenants are suing their landlords more often than ever before, and insurance companies are demanding more and more money to protect landlords from future claims. As a result, landlords are having to spend an additional $10 billion each year on insurance premiums alone.

Supply chain issues

As the value of materials increases, so does the risk that they can be lost, stolen or damaged. There are also frequent delays in the delivery of materials to account for. Global supply chain issues can be costly not just for builders and construction companies, but also for landlords, as they can lead to increased insurance premiums. Many properties are not adequately covered in the event of damage or theft of materials. All these have a rollover impact on insurance premiums—which ultimately leads to their increase.

How to reduce property insurance premiums

There is little that property owners can do to prevent catastrophic events, inflation, or disruptions in the global supply chain. However, there are ways to lessen the blow of rising insurance costs.

Dwelling Policy over Homeowner Policy

Very often, landlords will be offered a standard Homeowners (HO) policy for their rental property. While the HO policy can work, it doesn’t do an impressive job of matching the specific needs of a landlord to the coverage offered. 

A better option for landlords might be a Dwelling Policy (DP). The DP policy does not require a high amount of coverage for your belongings, and it also covers losses caused by renters, which a HO policy may not. Landlords can typically choose between two different kinds of Dwelling policies—a Dwelling Special policy (aka DP-3) typically provides more coverage than a Dwelling Basic (aka DP-1) policy.

Master Policy

Master Policies are another terrific option. A Master policy allows properties in different states and with different risk profiles to all be insured under the same policy and policy number. It eliminates the need for landowners to keep track of various insurance documents. Typically, there is only a single monthly premium across all the properties, which is very convenient if you have dozens of properties.

Not all rental properties require the same coverage — the needs could be entirely unique for short-term rentals compared to year-long rental properties. Similarly, if you own a “fix-n-flip,” your insurance needs might again be different. Make sure you provide a good description of your properties and needs to the insurance agent, so they can offer you a solution that’s right for you.

Enhance safety measures

Landlords must ensure that all loss prevention devices, including smoke alarms, burglar alarms, and deadbolts, are installed and working properly. They should also have a policy in place wherein if a rental property has any type of alarm or loud noise, visible signs of damage must be reported to the landlord.

Regular maintenance of properties

Regularly maintaining properties can reduce property insurance premiums for landlords. It is important to check for water leaks, conduct roof repairs, check wiring and plumbing, and other issues to reduce property damage and keep the building healthy. If using an HVAC system in a property, it is critical to follow regular maintenance procedures such as changing filters or replacing evaporator coils. All of this can help lower insurance premiums.

Pride of ownership and general maintenance

Insurance companies examine each property and can identify those that have been well maintained. Poorly maintained properties may have to pay higher premiums or may be denied coverage entirely. On that same token, properties that are well-maintained can net low insurance premiums for their owners.

Location-specific safety measures

Location-specific safety measures can be used by landlords and homeowners with high-risk properties that are prone to natural disasters specific to their regions. For instance, clearing away any nearby bushes that could catch a stray ember is especially important for homes in areas prone to wildfires. Similarly, storm windows installed in areas prone to high winds can reduce the likelihood of damage and ultimately lower insurance costs.

Older properties

Many rental buildings have been converted from older, more affordable units into luxury ones as developers and investors build new properties in neighborhoods that have seen significant investments to raise property values. Renovations that bring older buildings up to code for electrical, HVAC, and plumbing can have a significant impact on insurance costs for buildings that are at least 30 years old.

Higher deductibles

One way to reduce the property insurance premium for landlords, particularly in coastal areas, is to raise the deductible amount. This can be accomplished by increasing the deductible from $500 to $1,000 or even $2,000. It’s worth noting that higher deductibles will result in lower premiums, but only if the deductible is high enough. If a deductible is set too low, then the landlord will have to pay more than they would have otherwise.

We always recommend talking to an insurance advisor about the right deductible for you based on how much of the financial burden you can handle in the event of a loss.

Discounts and offers

Some companies may even give you a discount on insurance premiums if you have a professional property manager or if you buy your policy a long time before the date you want it to go into effect. Be sure that you are receiving all the discounts for which you are eligible. These could include discounts for having safety features, full-pay discounts, discounts for having multiple locations, or discounts for bundling.

Final Word

Insurance companies consider different aspects and employ different yardsticks when quoting you a premium. So, it usually helps to shop around.

Steadily, for example, does price comparison for your rental property quote across a large number of carriers nationwide, ensuring you get the best price on insurance in your market. Treat your rental properties like a business and find what makes the most financial sense for you.

Table of Contents

Rising insurance premiums for landlords

The reasons for rising property insurance premiums for landlords

Increase in natural disasters

Rising inflation

Increased risk of lawsuits due to tenant disputes

Supply chain issues

How to reduce property insurance premiums

Dwelling Policy over Homeowner Policy

Master Policy

Enhance safety measures

Regular maintenance of properties

Pride of ownership and general maintenance

Location-specific safety measures

Older properties

Higher deductibles

Discounts and offers

Final Word

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