Insurance can be complicated for a seasoned investor. Getting insurance for a couple of properties is easy enough but when you purchase more than 4- 5 properties, you no longer fit the mold for most insurance companies. Suddenly, without ever filing a claim, your rates can skyrocket or your insurance can be canceled for no reason at all.
Follow these 9 tips to make acquiring and maintaining insurance as painless as possible.
- Do not make claims for a small occurrence – Having a landlord’s policy is like having major medical insurance for your house. Every claim you make is counted against you and you should only make a claim for a catastrophic event or complete loss.
- Never call the 1-800 number, even for advice- Doing so can be counted as a claim even if you don’t make one.
- Find a trusted insurance agent- Instead of calling the 1-800 number for information, find an insurance agent that you trust to provide you with information and advice. Using an insurance broker may also be beneficial as they can shop your policy out to many companies to get you the best rate.
- Use higher deductibles- Being that you should only be using your policy for a catastrophic event, you should have the highest deductible that you are comfortable paying out. Your deductible should be no lower than $5,000.
- Do not get complacent with your insurance- Shop your insurance needs around every two years. Insurance companies tend to raise their rates each year regardless of your claim history. When shopping, make sure you read the fine print as not all insurance policies are the same quality. They can differ on replacement value, re-building with like materials, and depreciating items like the roof.
- Get liability insurance in addition to property insurance- Owning rental properties adds an additional risk for lawsuits so make sure you protect yourself. An umbrella policy may make sense when owning multiple policies. Also, you may want to title your property in an LLC for additional protection. Make sure you discuss all options with a qualified professional.
- Meet with your agent periodically- Do not assume that the insurance you originally purchased will cover your needs indefinitely. Things can change in your life that will make your insurance needs change as well. For example, construction costs may go up in your area and you may not have enough coverage to rebuild. Meet once a year or every other year to keep up with your policies.
- Bundle your insurance- You can get discounts by using the same company for all of your needs. Bundling car, personal home, liability, and investment home insurance can save you on all of your policies.
- Keep your properties well maintained- Insurance companies will periodically drive by to make sure what they are insuring is in good shape. Make sure that you are maintaining your property so that you will have no interruption with your insurance policy.
Insurance is a necessary evil but by doing your homework and following these tips you can make it the best experience possible.