Are insurance premiums affecting the return of your real estate investments?

Your real estate investment could be a small rental property, an apartment complex, commercial building, or an office building. Regardless of what kind of property it is, as an investor you want to maximize the income of your property.

Here are 5 ways you can manage the insurance costs of your real estate:

1.) Annual Policy Checkups

  • Review your limits and coverage’s.
  • As your business changes so should your insurance. Any changes at your property should be communicated with your agent to make sure your policy is updated to reflect these changes.

Examples of why it is important to review changes at property:

  • An addition of square footage to an existing building. Increasing the size of your building may significantly increase the building limit. This increase in building value needs be accounted for otherwise you face the potential of not having enough coverage.
  • Any upgrades to the safety features at your property such as installing a sprinkler system. A sprinkler system may reduce the potential of a fire burning out of control. In this example this update could possibly do 2 things. It could qualify you for a discount with your current carrier or it could make an insurance carrier available to you that offers lower rates than what you currently have.

In both examples you can see why it is important to meet and discuss your policies annually. Annual reviews allow you to budget for the year, protect your investments and implement a strategy that could reduce the costs at your property.

2.) Explore Deductible Options

  • Increasing your deductible will generate a lower premium
  • A higher deductible may be justified if you have a favorable loss history at your property.

While increasing your deductible may create some savings in the form of insurance costs, you still need to consider if the increase is worth it. Some questions to ask yourself and your agent:

  • How long does it take to recoup the difference in the deductible increase? If the savings can cover the difference within 3-5 years it may be worth it.
  • What is your comfort level with out of pocket expense when a loss does occur?
  • Are your revenue levels high enough to support a higher deductible?

3.) Pride of Ownership

  • Real estate owners can obtain better pricing when their properties appear to be well taken care of.
  • Clean properties typically generate less claims. Less claims means a lower cost of insurance.

There are a number of carriers that want to write the insurance for real estate investors. Well maintained properties typically allow investors a broader selection of carriers to choose from when insuring their property.  This allows for better control of costs from year to year.

4.) Use an Experienced Agency

  • An established agency will have broad market access and strong knowledge of the real estate insurance market.
  • The relationships that an experienced agency has formed with insurance carriers will assist in the reduction of insurance costs when putting together an insurance plan.
  • Partner with an agency that will create a customized policy that fits your needs. Taking a partnership approach with your broker allows them to deliver a policy that is aligned with your business goals.

5.) Ask About Other Discounts

  • A property may have unique features that qualify it for credits.
  • Smoke free lease, building sprinklers, burglar/fire alarms, and updates to your building are all things that may trigger additional discounts.

These are just 5 strategies to implement when managing the cost of insurance for real estate. KBK Insurance Agency works hard to find the best rate with strong coverage for investors to maximize the income generated from their properties.