Property Insurance with coverage for Vacation Rentals varies widely between carriers

[AJ Wong]

It's been a volatile year for real estate professionals, investors and owners alike. 

Most of us are familiar with the main headlines of rising mortgage interest rates, and industry upheaval, but lesser known investment challenges have presented themselves on a few transactional occasions this year. 

In particular are the rising costs of home owner property insurance premiums for residential and commercial properties. The hard numbers are not pleasant. According to this SPGlobal article the cost of property insurance premiums is rising, albeit at different rates geographically. The highest state year to date is a somewhat astounding 18%+ average increase for Arizona premiums just this year!?

The story on Main Street isn't much more inviting. I know my father in Florida has seen a dramatic rise in his premiums, and with my own clientele on at least three occasions we needed to shop extensively for insurance coverage that was not only reasonable but also provided the coverage the property and usage required. 

As my real estate businesses is almost exclusively focused on short term rental vacation homes on the OR & CA Coasts', my clients have a particular coverage requirement that has taken a bit more shopping than in previous years to get an economical policy. 

Recently on a quote for a large waterfront estate in Oregon there was a difference in premiums of nearly $7k! ($12k vs. $5k). 

Needless to say not all coverages are created equally, and a good insurance agent is increasingly an essential component of investors and RE professionals rolodex. An insurance premium that is double the initial estimate or Pro Forma is not going to help anyone's bottom line, and when lending qualifications are tight or a borrower's Debt to Income Ratios are in play, could be the difference in qualifying for financing or not. 

Furthermore, on a luxury investment property, the right coverage is essential to protect the asset and mortgage liability. 

I anticipate that premium increases, like other inflationary pressures will level off for 2024 with the exception of states like Florida and California where many large insurers have or are in the process of reducing exposure and issuance of new premiums. 

Any stories of dramatic rises or solutions to those problems this year? Any companies or BP contacts in particular that have been useful? Or solutions to rising carrying or insurance costs? 

I know at least for California, I'll be in need of reputable insurance agents that can provide policies with coverage for vacation rentals and multi family or commercial properties to myself and clients.