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Insurance costs

Along with property taxes and water & sewage bills, insurance for a rental property is one of the biggest expenses you really can’t avoid. Fortunately, unlike the former expenditures, the annual cost of for insurance is in the hands of the owner.

Considering how important this fact is, I was surprised to learn that I have never really put up a proper post on the blog about this issue. A migrated newsletter article from 2006 is all I have given to the topic. This is one of those things that is so obvious that I assumed I had discussed it. I guess that puts me in the same boat as many property owners. All insurance providers are not created equal.

When shopping around for insurance on investment properties many landowners simply go with the company they are most familiar with. This often leads them the same company that provides their car insurance companies or insurance on their personal residence. But rental and rehab properties are a different animal. Allstate might give you the best price in town on your car, but if they are providing your insurance for your rental property as well you can probably do much better.

In the last few years, for most types of investments, I have had a lot of luck with Shelter Insurance. I admit that I haven’t shopped around to every possible company, but they are usually quite competitive. I’ve always liked the fact that they are willing to give out generalized quotes rather than ask you a hundred personal questions before talking price. I actually just got a updated price list from Greg Tainter and Trent Gaines (636.938.5500) over at Shelter last week:

Four-Family Rates (exact rates vary)

Dwelling Coverage

Amount of Liability

Annual Premium

125,000

300,000

$737.00

150,000

300,000

$858.00

175,000

300,000

$979.00

200,000

300,000

$1100.00

225,000

300,000

$1221.00

250,000

300,000

$1342.00

Two-Family Rates (exact rates vary)

Dwelling Coverage

Amount of Liability

Annual Premium

125,000

300,000

$666.00

150,000

300,000

$774.00

175,000

300,000

$882.00

200,000

300,000

$989.00

225,000

300,000

$1097.00

250,000

300,000

$1205.00

Use these rates as a point of comparison. If you are paying in line with these prices you are probably getting a good deal. If you are paying significantly more, it’s time to start shopping around. Its not uncommon for property owners to see rate increases on insurance every year, so if you have had a property under a certain provider for a number of years, your rates might be out of line. Even if you haven’t, some companies such as Farmer’s Insurance are notorious for rates almost double those of other companies. If you have any doubts, its worth the time to get a few quotes.

I’ve always had good luck with Shelter, but does anyone else have a good recommendation? Who’s the best in town?

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Matt Kastner

Matt Kastner is an Investment Real Estate Consultant at St. Louis Real Estate Society in St. Louis, Missouri. He is also develops properties on the side through Threshold Properties. When he isn’t representing investors in the purchase or sale of multifamily properties, rehabs, foreclosures and other income producing properties, he is often taking on rehab projects himself. He lives in South St. Louis and has been in the real estate business since 2004.

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2 thoughts on “Insurance costs”

  • G. Kelly

    December 11, 2008 at 5:18 pm

    Another option instead of shopping around yourself is to use a good independent insurance broker. I’ve have great guy at Consumers First in Fenton, Chris Behnen, who handles all my insurance. Whether it be auto, life, home, rental, whatever, an independent agent can shop all the companies and find the lowest price that covers you.

    My guy also re-shops for me everytime one of my policies is about to expire. This is very important b/c insurance companies regularly drop their prices to gain market share, theory being most people are going to shop once, buy the lowest, then never change when they raise their prices in future.

    Reply
  • Kevin C

    April 8, 2009 at 11:27 am

    I recently tried a larger insurance agency (selling Travellers and a few other policies), but they wanted to base insured amount on their ridiculously high estimates of replacement cost. Also they had trouble with non-owner-occupied places that had any knob and tube (even in non-exposed locations).
    I’m still fairly happy with State Farm/ Tom Nagel who will insure you based on your estimate of market value. Rates are a bit higher than those you list but I’m using 500k liability and with 10% deductible earthquake. Next insurance cycle I may check out your guys though.

    Reply

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