Smart Ways to Secure Lower Property Insurance Premiums

Insurance is one of society’s necessary evils. So many times, paying our premiums seems like a waste…until we have to make a claim, that is! Whether we like it or not, property insurance is an unavoidable expense in real estate investing. And with insurance premiums set to hit a record high in 2024, investors are feeling the cash flow squeeze.

But we’re not helpless to the whims of insurance companies – at least, not entirely. Here are a few things real estate investors can do to get the best rates possible.

5 Strategies to Get Better Property Insurance Rates

#1 – Ensure you’re not OVERinsured.

Many insurance companies use rising property values as a justification for increasing premiums. They would claim that properties are more expensive to replace, so costs go up. To a degree, this is true. However, there’s a difference between a property’s sale value and the property’s replacement value. Generally, the latter is significantly lower. Investors don’t necessarily need coverage for the property’s full market value. Examine the disparity between these appraised values – chances are, you would be better off with less.

#2 – Raise your deductibles.

Raising your out-of-pocket expenses can help reduce monthly premiums. If you’re good about keeping a robust safety net in place, this shouldn’t be too much of a problem. Of course, it also depends on how often you expect to make insurance claims. Consider environmental factors that pose a risk to your property.

For example, Bankrate found that Louisiana and Florida have the highest insurance premiums in the country due to hurricane and severe weather risks. California is beginning to see similar challenges – like limited coverage and insurance providers leaving altogether – thanks to wildfire risks. In fact, California is the state that experiences the most insurance claims. You may not want to increase your deductible in markets with elevated risk.

#3 – Shop around.

Investors, if you’re unsatisfied with insurance premiums, shop around! You never know what additional discounts, bundling deals, or generally lower rates are at your disposal with a different provider. You don’t owe an insurance company your loyalty.

Ask friends and fellow investors, or contact your state insurance department. Talk to various insurance agents, use consumer guides, and do a little digging. Remember that the premium alone isn’t the reason to pick an insurance company. You also want to work with someone who honors legitimate claims without hassle!

That said, many insurance companies offer discounts for long-term clients. Shop around and compare rates, but don’t discount the potential benefits of sticking with the same provider.

#4 – Maintain good credit.

Insurers increasingly consider credit standing when pricing out premiums for customers. Pay bills on time, don’t overleverage debts, and don’t take out more credit than necessary. Keep a handle on your balances to ensure they don’t creep too high. Lower balances are better for your credit score and help keep monthly minimums low, making the whole debt easier to “knock out” in one fell swoop. Check your credit score and credit history regularly so that mistakes can be rectified.

#5 – Mitigate insurance risks.

Finally, we have an umbrella recommendation for you – mitigate potential insurance risks. These risks can come from the overall market environment. Let’s refer back to that Bankrate analysis. The three most commonly claimed causes of property loss are wind and hail, fire and lighting, and water damage and freezing. Investors should evaluate their exposure to these threats overall while managing properties well to reduce such incidents and their severity.

Smoke alarms, security systems, storm doors and windows, etc., reduce potential damage and incentivize discounts.

There are other risks investors can handle through property management. Certain improvements can qualify your property for additional discounts – the addition of security systems, heavy-duty locks, and sprinkler systems all help. 

Skip properties with “attractive nuisances” or eliminate them ASAP. Trampolines, swimming pools, and playground equipment are all big liabilities.                                        

Are rising insurance premiums making you rethink this real estate investment thing? Before you jump ship, think again! Read on: The Danger of Fair-Weather Real Estate Investing.

Here’s the bottom line: don’t settle. There are always strategies and options out there for investors looking to increase their cash flow without compromising on quality.

Build your portfolio with the pros who’ve seen it all… REI Nation!