How to keep insurance low?

Question

Hey BP Folks,

We just closed on our second property in Houston and I am currently shopping for a cheaper insurance option. I was told  by my broker that most carriers have moved out of Houston area. I am wondering how true is that?

From what I can tell, the insurance quotes I have from 2 different brokers are from the same carrier and they both claim that this is the cheapest option they have found. And it is still  much higher than my target (typical percentage that I allocate for my portfolio).

Wondering if there are other strategies to reducing the premium other reducing coverage (shopping around doesn't seem to be helping so far since I am being quoted the same carrier).

The house was recently renovated by seller so perhaps the upgrades are not in most insurer's database. But then I wonder, if doing upgrades to a house would increase premium further (because the replacement cost could go up) or bring in down (since the probability of damage or liability claim might be lower now).

Thanks in advance for all your insights.

Jason Bott · Answer

@Manas M. unfortunately, I can confirm the brokers you are being honest with you.

Houston is a very difficult area right now to find affordable insurance.  I recommend calling a few more brokers, but let them know who you have received quotes from already so you don't get a 3rd and 4th quote from the same carrier.

John Underwood · Answer

Keep your deductibles high and don't make any frivolous claims.

Bo Bond · Answer

@Manas M. - You'll want to ensure the carrier has an "A" rating and a solid financial outlook by AM Best (or another insurance carrier rating company).  Excess and surplus lines carriers are used all over the country, but especially in hard to write places like the Gulf Coast (TX to FL) and up the East Coast where hurricanes are more prevalent.  Simply put, these carriers have more flexibility in their policy language, their deductible options, and their premiums/rates.  This flexibility "usually" allows them to better compete in hard to write areas of the country.  They would also likely be the go-to carriers for your state (CA) when it comes to areas that are more prone to forest fires or earthquakes.

However, they're not backed by the state fund if they ever go insolvent.  Going insolvent is rare for these larger carriers, but can happen.  As long as you're aware, then you can evaluate and make an educated decision for yourself.

As an example, Lloyds of London is one of the most well known excess and surplus lines carriers in the world.  I've written many clients with this carrier/syndicate, and have very little worry about doing so.  Again, as long as they are "A" rated carriers and have a strong financial outlook by AM Best, I wouldn't worry to much about them being excess and surplus lines carriers, especially when you're specifically talking about Houston, TX.

Steven Foster Wilson · Answer

I usually network with a handful; of agents / brokers and compare quotes, sometimes there will be a difference of thousands of dollars. Ive found in Columbus at least that there are local guys that will quote super low.

Bo Bond · Answer

@Manas M. - In Houston (Harris County), you should be seeing about .80 cents (give or take a few cents) for your more non-coastal locations (Tier 2), and 1.05 for your coastal locations (Tier 1).  On top of that you should see about $80 per dwelling for a $1M/$2M limit of liability.  Most carriers consider Tier 1 to be South of I-10, and East of Hwy. 288.

Below is an example that should help, so just plug in your own RC:

Non-Coastal:  $150,000 Insurance Replacement Cost x .0080 = $1,200 + $80 = $1,280 (taxes and fees likely to be added so keep that in mind)

Coastal:  $150,000 Insurance Replacement Cost x .0105 = $1,575 + $80 = $1,655 (taxes and fees likely to be added so keep that in mind)

Timothy Smith · Answer

I would Definitely shop it around

Manas M. · Answer

I received another quote from Arcana which is more competitive and about 80 cents per dollar of replacement cost.

The agent described it to me as an "excess and surplus lines carrier". I did some search on what that means and this link provided good information.https://generalliabilityinsure...

However, I am still a bit unsure about if there are any major downside of going with an"excess and surplus lines carrier" vs a standard carrier.

Manas M. · Answer

Thanks @Bo Bond . This is really helpful. Looks like the quote I have received so far are assuming $1.05  for the replacement cost.  I looked my property is just north of I-10 in Katy but perhaps they still consider it tier 1.

Manas M. · Answer

@Cameron Moore sorry for the dumb question but how does roof age affect the premium - newer roof implies higher premium (because replacement cost is now higher) or a lower premium (because it may not get damaged easily with for eg hails).

How to keep insurance low?

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