As a property owner, you understand the importance of safeguarding your rental investments. Landlord insurance offers invaluable protection against potential financial setbacks associated with rental properties, allowing you to protect yourself and your rental property business.
In this article, we’ll walk you through the average cost of a landlord insurance policy, as well as seven simple, effective strategies you can take on to help you lower your annual insurance premiums.
Why is Landlord Insurance Important?
Landlord insurance is not mandatory, yet many homeowners are unaware of the benefits associated with it. The first thing you need to do to make sure you’re protected if something goes wrong with your rental property is to get the right kind of insurance.
Related: What Is Rental Property Insurance & Do Landlords Need It?
Instead of regular homeowners insurance, you should switch to landlord insurance. When buying your landlord insurance policy, there are a number of actions you can personally take to lower the cost of premium you pay.
Insurance companies consider many factors while determining the cost of landlord insurance premiums. They also ensure that a building complies with existing construction rules. Whether you’re a seasoned landlord or just starting in the rental business, these tips will help you make the most out of your insurance policy without breaking the bank.
What is the Average Cost of Landlord Insurance?
Landlord insurance costs around 25% more than homeowners insurance. For instance, if homeowners insurance is $1,800, landlord insurance on the same house would be approximately $2,200 to $2,230 when used as a rental.
A landlord can add up an insurance premium to the total insurance cost, which accounts for the operating expenses of the rental property. This premium is deducted from the rental income landlords receive from a tenant.
In 2023, some of the states with the highest landlord insurance premiums were Louisiana, Florida, Texas, and Colorado. This interactive map of the United States shows the average cost of landlord insurance in many states.
What Are the Landlord Insurance Types?
Landlord insurance policy comes in three types, each with different policies and costs. These are called dwelling policies.
Dwelling Policy 1 (DP-1)
This landlord insurance policy is very cheap and offers limited coverage. It only includes the protection for specifically listed risks.
Suppose your home gets damaged by a hurricane. If you haven’t named this natural disaster in your policy, you can’t file a claim for the resulting property damage. However, reimbursements can be made depending on the actual cash value, which is the total damage cost, excluding wear and tear.
Dwelling Policy 2 (DP-2)
This type covers many elements and is more expensive than DP-1. Still, you need to mention the exact risks in the policy. In addition, you’ll be paid out on a replacement cost basis, meaning that no amount will be deducted for wear and tear.
Dwelling Policy 3 (DP-3)
This type of insurance is costly but has the most extensive dwelling policy coverage. It covers all the risks, either mentioned or not, except those you specifically exclude from the policy. Like the DP-2 policy, you’ll also get reimbursements on a replacement-cost basis.
Tips for Lowering the Cost of Landlord Insurance
Landlord insurance costs are determined based on a number of factors both within and outside your control, including claims history, replacement cost, construction type, housekeeping, exposures, and occupancy. These seven factors are within your control and will enable you to get a lower quote on landlord insurance.
1. Property maintenance
It’s important to keep your property attractive to insurance companies and potential tenants. This is referred to as “pride of ownership.” Watch out for any wear and tear or minor damages in your home, and perform regular maintenance checks to help you identify hidden cracks.
Keep the sidewalks well maintained, and ensure fire escapes and smoke detectors are functional. Get rid of any pest infestation or mold detected in any corner of the home. The key is to act immediately to show the insurance company it has a low risk of damage.
A best practice is to ensure that your property has these essentials:
- Closed fire doors
- Well-lit hallways
- Clean walkways
- Child safety measures
- A well-built roof and foundation
Related: The 6 Top Unsafe Property Living Conditions That Landlords Must Avoid
2. Increase the deductible amount
Raising your deductible helps you lower landlord insurance premium costs significantly. The deductible is the amount you have to pay on your own before the insurance company covers any claims expense.
You should increase the deductible amount to the point that prevents any unreasonable claims. Then, the saved premium amount can be used to self-insure other claims.
That said, when you increase your deductible amount, you are also accountable for that higher deductible when you do file a claim. Keep this in mind in terms of managing cash flow.
3. Emphasize safety in your building profile
Safety measures add value to your building profile in the eyes of the insurance company. When speaking with an insurer, it’s wise to emphasize all the safety measures you’ve taken to boost your property’s safety. These can include security cameras, efficient lighting systems, alarms, smoke detectors, etc. Many insurers will offer discounts for connected security devices and other measures that help ensure the safety of your property.
4. Explore eligible discounts
There are many discounts that you may be eligible for when receiving a landlord insurance quote, including multi-property discounts, alumni discounts, veterans benefits, and more. When you speak with a licensed insurance agent, be sure to mention any discounts that you may be eligible for—or ask about any you may not be aware of. Maintaining a good insurance score will also help with receiving lower insurance quotes and can get you preferential rates.
5. Upgrade core elements of your property
An upgraded property benefits insurance companies, homeowners, and tenants alike. When you make upgrades to your plumbing, heating, or electrical systems, you can ask your insurance provider to upgrade the policy details.
A good risk profile helps your property get better pricing and favorable terms at the time of renewal quotes.
6. Get a master landlord policy
If you own multiple properties, the best way to get better landlord insurance premiums is by getting everything insured under a single policy. Different policies usually have a higher risk of getting overlooked. So a master landlord insurance policy will help you monitor all your properties scheduled according to their respective coverages.
7. Consult the right landlord insurance provider
An experienced landlord insurance provider knows all the ins and outs of markets and gives you the best premium rates. So, search for trusted insurance companies in your area that protect your interests and offer you affordable premium costs.
If you’re looking for a reliable and quick landlord insurance provider, Steadily is here to help you. Submit the quick quote form by providing your property’s address. Our quote form will prefill with all the relevant details on your property, and our team of dedicated landlord insurance experts will provide a quote via phone, email, or SMS—with coverage starting as early as the next business day.
Ready to get started? Get a quote today.
This article is presented by Steadily
Steadily is America’s best-rated rental property insurance provider. Get coverage online in minutes for all property types and all policy durations, including short-term rentals. Visit Steadily.com to get a free quote today.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
