Optimizing landlord insurance

[Petur Karlsson]

Hey everybody!

I've reached three rental properties, totaling six units. I have landlord insurance on all three, and require the tenants to have renters insurance. I operate them as a sole proprietor by the way.

What do you think about the idea of looking into the policy and cutting out some coverages to downsize the premium? Do you have any other tips when it comes to lowering insurance costs? After all, even $150 savings per month is equivalent to the cash flow from a single rental unit.

One thought that crosses my mind is that I probably wouldn't make insurance claims on small things like appliance replacements, since it will increase the policy premium(?) The tenants have renters insurance and their personal possessions are covered as well, and no tenant has a significant amount of personal assets in their units. Isn't it pointless for me to have coverage on personal property then? 

My last question: Do you have any recommendations on how to find great competitive insurance bundles? I now have three different insurance companies for my policies; Nationwide for home & auto - Windsor-Mount Joy for rental properties - Progressive for RV insurance. There must be savings on the table in negotiating everything into the hands of a single insurer. My insurance broker hasn't found a reason to bundle them all yet, but I'm interested in your take on the matter.

Thank you in advance for any thoughtful replies.

[Casey J Burkhead]

Hi Petur,

It can definitely be beneficial to bundle everything with one personal lines company since the investment properties are in your personal name.  Some carriers are less competitive with multi-family homes though.  If you don't have mortgages on the properties, it can be cost effective to do a property package policy with a commercial insurance company for the rentals - this is where you can insure multiple properties on one policy.  You can still purchase these types of policies even as a sole proprietor.  And then just go with whoever provides the best coverage at the best rate for your personal auto and home. 

For my investor clients, I usually recommend a higher deductible in order to save on premium and to dissuade them from turning in small claims that could cause future policy surcharges.

If you're not worried about covering appliances, you probably don't need personal property coverage on the rentals.  However, some insurance carriers allow you to choose how much personal property you carry on a rental and some don't.

To answer your last question, insurance brokers don't always have access to every insurance carrier or insurance option.  I would ask your agent to at least show you some quotes in order to keep them honest.  If they know you're shopping, they should be doing their due diligence to make sure they're providing you with their best option.  If not, you may want to check elsewhere.

- Casey