7 Ways to Keep Landlord Insurance Costs Down

Whether you own a single-family property or an apartment building, landlord insurance is essential to protect your investment. Sometimes it seems like annual insurance costs are rising faster than any potential profits, thanks to natural disasters that drive up insurance premiums.

You should know going in that the average landlord insurance policy costs 25% more than typical homeowners coverage. That’s because it covers a lot more, including: 

• Physical damage to your property caused by covered perils such as fire, wind, hail, lightning, ice or snow. It also covers maintenance items stored on the premises, such as a snowblower or landscaping tools.
• Liability protection, in case someone gets hurt at your place. The policy covers both medical expenses and legal fees.
• Loss of rental income, which is typically included in a landlord policy. That helps if you need to repair or rebuild after a covered loss.

Some hazards, like earthquakes and floods, are typically covered by separate policies. According to Nolo.com, you can even tailor landlord insurance coverage for claims like invasion of privacy, libel, slander, and unlawful and retaliatory eviction.

Getting the right landlord insurance is crucial. However, there’s no need to overpay. The following tactics will help ensure you get excellent coverage at the right price.

1. Be proactive about maintenance

It’s easy to put off fixing issues like a cracked sidewalk or a wobbly stair railing. That’s especially true if you’re a new landlord with a full-time job and a family. You’ll get to it eventually, right?

Ignore such problems at your own peril, though. If someone gets hurt and files a lawsuit, it’s going to cost you a deductible and, maybe, time spent in court. The National Association of Realtors has a home maintenance checklist to help landlords keep an eye on things.

That goes for the inside as well as the outside of your property. For example, 27% of fires caused by clothes dryers are due to lint build-up in the duct. Cleaning the duct at least annually will reduce fire risk.

Or maybe your renter complains about hot water not lasting long enough, which could be a sign your water heater is on its last legs. Water heater leaks/floods are among the most common reasons for residential water damage, according to Angi.com. It’s much more cost-effective to prevent a flood than mop up after one.

2. Identify and mitigate hazards

Your insurer might offer a service called “loss control engineering,” which is a way to find and help forestall potential issues. For example, wildfire damage has been in the news a lot over the past few years. A loss control specialist might suggest cutting back brush around the building to create a “defensible space” if wildfire approaches your town.

Technology can also be a big help. Moisture detectors let landlords or maintenance workers know there’s water in the basement or inside a sink vanity. Smart security cameras will alert you by phone if someone is peering in windows at your rental property or breaking into the storage shed at your apartment building.

Being proactive instead of reactive helps prevent pain and suffering – both to your tenants, and your wallet.

3. Consider a higher deductible

A higher deductible generally means a lower premium. Good news for landlords, right? However, it means you’re assuming a bigger share of the risk. If you need to replace a rotting entryway step, the cost won’t come close to your $5,000 deductible. That means you’ll be paying out of pocket.

But a lower premium/higher deductible might also work in your favor. Suppose you opt for a $5,000 deductible and full replacement cost for your rental property. Two years later, it’s destroyed by an arson fire. All you’ll need to pay is the $5,000 deductible; the insurer will cover the cost of rebuilding your property.

Every situation is different. Talk to your agent about whether a higher deductible is the right choice for your property.

4. Screen potential tenants carefully

Don’t rent to just anyone! Yes, even if their mom goes to church with your mom. Landlords should screen applicants to reduce the risk of things like late payments or destruction of property. Such things can cost you, big-time.

It’s vital to vet applicants without breaking fair housing and/or anti-discrimination laws. According to Nolo.com, you must choose renters based on “legitimate business criteria” – otherwise, you could wind up in court.

Companies like RentRedi will screen applicants for proof of income verification and also provide credit, criminal and eviction reports. This helps you choose a renter based on those legitimate business criteria.

5. Shop around

Maybe you stuck with the same insurance company that the building’s previous owner used. If so, how do you know you’re getting the best deal?

Ask for quotes from other agencies. Best-case scenario: Those quotes aren’t any cheaper, which means you can stick with the agent you already know.

But while you’re shopping for the best quote, make sure that you…

6. Read the fine print

If you’re shopping around for better landlord insurance, make sure you’re comparing apples to apples. That surprisingly (or suspiciously) low premium quote might not have the same coverage as your current policy. For example, it might not include sewer line insurance, which is a good idea for some properties.

That lower premium quote could cost you a lot later on if you have to file a claim and discover the new policy has limits you didn’t fully understand. Know exactly what you’re getting – and not getting – if you change insurers.

7. Rethink a smaller claim

Graffiti appears on the side of your apartment building. A couple of windows are shattered during a windstorm. Should you file a claim?

Technically, you can. Realistically? You probably shouldn’t.

For starters, small claims might not meet your insurance deductible. More importantly, filing small-dollar claims could cause your annual premium to go up – and filing more than one minor claim could contribute to your policy not being renewed.

Sometimes, paying out of pocket is cheaper in the long term.

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