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3 Ways to Lower Your Landlord Insurance Expense

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The 3 most expensive operating costs for income property investors are typically the investment property mortgage, property taxes, and landlord insurance.  The purpose of today’s post is to provide some advice on how to lower your insurance costs.

One of the most obvious tips is to have your deductible increased.  I generally recommend a deductible of no less than $2,000, but of course your specific situation might warrant a lower deductible.  In any case, ask your insurer what your premium would be at $2,000, $3,000, and even $5,000, and choose the level that represents the best balance between risk and cost.

Another obvious tip is to review your coverage every year to make sure you are not paying for something that you really do not need.  Similarly, make sure the rental property valuation is accurate (for example, make sure that the value of the land is not incorporated into the valuation).  You should also use this annual review process as an opportunity to shop around for a better deal.  Insurance providers can vary substantially on price because they typically use proprietary algorithms to develop their own risk-based pricing structures.  Thus, 2 insurers might have materially different prices for the same exact coverage.

Another tip is to enhance the security and/or safety of the property.  Many insurance providers will give discounts for properties with security alarms, without fireplaces, without dogs, etc.  Call your insurer and ask what discounts are available, and then do your own cost-benefit analysis to determine if the discount warrants making the improvement.

In the final analysis, managing an investment property is like managing a business.  Your goal should always be to maximize rental property income while minimizing property costs.  Whether it’s refinancing your mortgage, appealing for lower property taxes, or switching to less expensive landlord insurance, always do whatever you can to reduce your expense base and hence increase your bottom line.

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