Landlord insurance is essential to any rental property owner’s budget. This is the primary safeguard for your investment and a place where you don’t want to cut corners without being fully aware of what those corners entail. But with high mortgage rates, inflation, and rising costs on almost everything, including insurance, many landlords are now looking for ways to cut costs, even on their insurance policy. We’ll walk you through how you can reduce costs without compromising on essential coverage.

The state of the market 

The insurance market is now in a state known to industry professionals as a “hard market.” In short, in a hard insurance market, it becomes more challenging for individuals and businesses to obtain insurance coverage, and the insurance cost typically increases. 

The hard market is caused by several factors, but the primary cause for today’s hard market is the increase in catastrophic weather events, which again leads to a rise in claims. This has caused many insurance companies to tighten their underwriting guidelines, or even leave specific markets or not accept new business, like for example in California or perhaps most notably, Florida.

As a result, the national average multifamily insurance rates have risen by as much as 50% from 2017-2022, and are predicted to continue to rise in 2023 and 2024. 


Ways to Lower Your Landlord Insurance Costs

While there are factors that impact your premium rates that are out of your control, several factors are indeed within your control, such as keeping a well-maintained property, adjusting your deductibles, and simply getting quotes from multiple carriers.

Some of these tips are pretty simple and don't require a lot of work. Others involve a bit more effort and in some cases a financial investment. Still, they are nevertheless worth considering as the benefits of implementing them reach beyond the possible reduction in premium costs.

1. Shop around

Getting quotes from other insurers is a non-intrusive, quick way to see if switching to a different carrier could lower your premium rates. It is important, though to make sure your coverage won’t be compromised. Always compare your new policy to your existing one, and pay extra attention to dwelling coverage and liability coverage where you want to be 100% sure you’re adequately insured. 

In addition, it’s important to know that not all carriers are created the same. As long as you have a well-maintained property that shows pride of ownership, getting an insurance policy from an admitted carrier should be your first choice. The main difference between admitted and non-admitted carriers is that admitted carriers are licensed by the state and operate under state regulations, while these regulations do not bind non-admitted carriers and are mostly used for higher risks or unique situations.

2. Upgrade important parts of your property

Every insurance company wants to see that the property is in good condition and that the core structure is robust and safe. Cosmetic renovations such as replacing the kitchen or painting the walls are of little importance to insurance carriers, but replacing an older roof or outdated electrical system could positively impact your premium rates. 

3. ACV vs RCV

Choosing to insure for Actual Cash Value (ACV) over Replacement Cost Value (RCV) can have a big impact on your premium price, but doing so should only be done after very careful consideration. ACV takes depreciation into account, meaning you'll receive a payout based on the current market value. In contrast, RCV provides coverage for the cost of replacing the item with a similar new one, without factoring in depreciation. 

If you own a property that you wouldn’t consider rebuilding in the event of a total loss, or you have some savings to help cover half the costs of replacing a roof, for example, then choosing ACV might be the right choice. In any other case, you’d be better off choosing RCV, knowing that your insurance would cover the complete rebuild in the event of a loss.


4. Adjusting the deductible amounts

Raising your deductible – the amount you pay out of pocket before insurance coverage kicks in – will almost always lower your premium rates. The deductible is usually a fixed amount, such as $2,000 or $5,000, but can be increased according to your personal preferences. Most carriers will have a maximum deductible amount, and at Honeycomb we set the cap at $75,000. 

Increasing the deductible amount should be done with care. Make sure you're comfortable with the higher out-of-pocket expenses in the event of a claim, and if you don’t have the means to cover it, it’s a very risky strategy.

5. Remove unnecessary additional coverages

When considering additional coverages for your landlord insurance policy, it's essential to ensure they serve a practical purpose rather than being mere "bells and whistles." Take, for instance, the "Hired and Non-Owned Auto" coverage. If you rarely or never employ non-owned vehicles for your rental property tasks, the liability risks linked to vehicle use might be minimal, making HOA coverage unnecessary.

To stay well-informed about your insurance, it's a good practice to thoroughly review your policy and its coverages at least once a year, especially before the renewal date. This allows you to stay up-to-date on any additional coverages you may have and make adjustments as needed to align your policy with your actual requirements.

6. Focus on safety measures

By implementing safety measures, landlords can substantially reduce the likelihood of accidents, injuries, and property damage, leading to fewer insurance claims. It can also lead to direct discounts from the carriers in some cases. For example, security cameras can act as deterrents, discouraging criminal activities and unauthorized access. They also provide crucial evidence in incidents or disputes, aiding in swift resolutions and liability determinations. 

Additionally, maintaining safe properties enhances tenant satisfaction, contributes to tenant retention, and ensures compliance with local building codes and regulations. 

Bottom line

In conclusion, navigating the challenges of rising property insurance costs requires landlords to be proactive in managing their policies. By implementing the strategies listed above, landlords can strike a balance between cost-effectiveness and comprehensive coverage, safeguarding their investments while mitigating financial strain in an increasingly challenging insurance market.