Getting the right amount of property insurance can be tricky. If you want to cover 100% of a property’s replacement cost, including the contents inside it, you’re going to pay more for insurance. However, if you cover less than 100% of the replacement cost with your insurance, you’re taking a risk in the event you’ll actually have to use the insurance. Here are a few tips and tricks to ensure you get the right amount of coverage without breaking the bank.
Get an Appraisal
When it comes to investment properties, the first thing real estate property managers should do is get an appraisal
on their property. If possible, be present when the appraiser is walking through the property, so you can point out any unique details to ensure the cost is accounted for. The appraisal will act as a basis for your replacement cost, so you’ll know exactly how much coverage you must have in the event of a total loss situation.
Select a Higher Deductible
The cost of property insurance is expensive, and unoccupied home insurance is even more expensive. One tip to lowering your monthly or annual premium is to request a higher deductible. This just means you’ll have to pay more out of pocket in the event of a claim before the insurance kicks in. But if you don’t have to make a claim for several years, then the amount of money you’re saving with the lower premium could make the decision well worth it. Yes, it’s a risk you take, so you’ll have to decide if it’s worth the viability for your long-term investment.
Inflation Guarantee
Many property insurance companies offer an inflation guarantee, which ensures your home will always be current with the market. Your premium may increase slightly on an annual basis for inflation adjustments, but most real estate property managers agree it is worth it to guarantee the property holds its value during uncertain economic times.
Property Insurance with Higher Guaranteed Replacement Costs
Some insurance companies will have a cap as to how much you can cover your property for. Consider insurance companies with no cap on replacement costs, so you can get as much coverage as you want or think you may need. At the very least, many companies will cap their replacement guarantee at around 120%. This is a good number to start with and protects you if labor and building costs rise in the next several years.
APIA wants to make sure you have enough coverage for each property you invest in, but without paying too much. We’ve helped thousands of investors with their property insurance needs, so be sure to contact us to see how we can do the same for you.
