Investment properties can be a good source of income even in a less-than-ideal economy. A great way to maximize your profit is to keep the cost of owning the property down. One area to scrutinize is your property insurance policy. Since insurance premiums are usually higher on a rental home, it makes sense to try for the lowest rate possible and still get the coverage you need. Here are some strategies for saving money on investment property insurance.
One of the best ways to save money on insurance is to shop around for the best coverage at the lowest price. Try to get at least three quotes from different insurance companies, and if possible, try to speak with an agent personally, rather than just looking at figures on the internet. Some companies specialize in working with rental properties, so you may want to compare their rates with those of standard insurance companies.
Another way to lower insurance costs is to look for a higher deductible. Going from a $500 to $1,000 deductible can make quite a difference in monthly premiums. So, you’ll want to get the highest deductible that you can safely afford.
Also, be sure to inquire about any discounts the company offers. For example, insurers will usually lower premiums on houses with safety features such as smoke and carbon monoxide detectors, deadbolt locks, sprinklers and alarm systems. Certain types of roofing materials may qualify for discounts if they can withstand hail or wind damage. There may also be discounts for certain types of tenants. For example, people that are home more often, such as retirees or stay-at-home moms, may be a deterrent to burglars. They are also more likely to stop or report a fire than tenants who are often away from home. Also, be sure to check for multiple policy discounts if you own more than one property. If you haven’t filed a claim in a while, check to see if the company will lower your premiums for this reason.
Additionally, check to make sure that you are only insuring your property’s value and not the value of the actual land it is built on. For example, land is unlikely to be stolen or damaged, but your property might be. Also, make sure that you understand what you are being charged for. A policy that covers the actual cash value will pay only the cost of rebuilding at the current market value, while a policy that covers replacement costs will pay for the full cost of rebuilding the property.
Credit scores may also determine your cost, since some insurance companies will give lower rates for higher credit scores. Therefore, be sure to maintain good credit, and keep track of your credit score. Another thing to remember is that as a property owner, you do not need to insure your tenants’ personal belongings. Check to see if this option can be excluded from your policy and recommend that tenants purchase their own renter’s insurance.
The bottom line is that by looking at all of your insurance options, you may be able to save money in the long run and maximize your profits. Good luck!
In the wake of Hurricane Katrina and other destructive storms, getting affordable property insurance hasn’t been easy. Many private insurers shed high risk clients after storms in 2004-2005, and raised assessments for others. For those who could no longer afford private insurance (or who were declared uninsurable by private insurers), state insurer Citizens Property Insurance Corp is the last resort.
Over the last year, the state has been attempting to keep property insurance rates low for those who are insured with CPIC. According to critics of the latest property insurance changes, however, Florida residents who are insured by private companies will end up paying more so that the rates can stay low for those insured by the state-owned company. The last week of March saw the Florida Senate approve some changes to property insurance that might end up increasing property insurance rates by around 3%.
The bill was backed by Chief Financial Officer Alex Sink and approved by the Senate Banking and Insurance Committee. The intended effect is to reduce Florida’s Hurricane Catastrophe Fund by $3 billion. This means the state can reduce its investment in CPIC and therefore reduce its risk.
At the same time, however, the state has also voted to freeze CPIC insurance rates through to the end of 2009. CPIC insures more than 1.3 Florida residents, and the rate freeze that occurred last year was done to avoid an increase that could have seen rates up by as much as 29%.
The problem is, according to critics, that CPIC’s premiums aren’t high enough, and that the company won’t have enough cash reserves to be able to pay out claims if a major storm hits.
This is why the $3 billion reduction in the Hurricane Catastrophe Fund is significant. The Catastrophe Fund is a sort of safety net that can kick into action when Florida is hit by a major hurricane, and is intended to reimburse private insurers a portion of the money they pay out in claims. However, with the fund now reduced by $3 billion, the deficit is likely to be made up by rate increases for homeowners.
Last year, the state actually increased the Catastrophe Fund by $12 billion, but this year has been reduced by $3 billion. The fund was increased last year to reduce costs for insurers, and indirectly for homeowners. However, by increasing the Catastrophe Fund, the state of Florida was also increasing its own level of risk.
The state now wants to start decreasing its investment in the fund to reduce its risk. The net effect, however, will likely be the opposite of that which it originally intended. With private insurers taking on more risk relative to last year, the end result is more than likely going to be increased property insurance rates. The estimate is around 3% overall, with a slightly higher increase possible for Southern Florida residents.
If you desire to protect yourself from being financially impacted from a natural disaster which can devastate your business, acquiring property insurance can be a great idea. This special insurance can protect you from any physical damage or loss of assets. Assets that are defined here, is property that is used for your business. A lot of people think when they acquire home owners insurance that it covers everything. However, a homeowner’s policy does cover personal property, but not business property.
One thing that most people are often concerned about is the money they will have to pay out for repairing their property once it’s damaged by a natural disaster. You can be worry free once you acquire this type of insurance. After your property is covered by a policy, all of the necessary expenses that relates to the repairs of your property will all be taken care of by the insurance company.
Property Insurance Benefits
Compensation is the benefit that is received for any damage that occurs. Reimbursement does follow specific procedures. The property that is insured is usually evaluated in two ways:
1 - If your coverage requires for the actual cost of replacing property, this is known as Replacement-Costs.
2 - If your coverage requires for replacement minus the physical depreciation cost of your property that is due to damage or loss, this is known as (ACV) Actual Cash Value.
Actual Cash Value coverage is usually offered at a lower premium; however, the reimbursement amount may be inadequate, if you need to have your items replaced.
You can purchase additional insurance that will cover your business property through most home owner policies, or you can acquire an individual policy. If you would like your property to be covered at its full value, then acquiring an individual policy would be the best option. This will safeguard yourself from any extreme losses that may occur, while keeping your property fully covered.
What Does The Insurance Cover?
A number of policies do offer coverage for basic things such as inventory, building structure, furniture, equipment and other supplies. Additionally, there are policies that can cover cash, hard to replace documents, and securities. The two kinds of perils that this insurance will cover are: known perils or multiple perils.
Known perils can either be fire or theft. Most insurance companies that offer various peril coverage can include both theft and fire as part of the policy. A known peril policy can also cover losses that are due to the dangers which are stated in your policy, whereas a multiple policy will cover all perils, except for those that are stated as excluded within your policy.
In most cases, businesses often acquire multiple risk insurance policies that can compensate the business owner. Occasionally, business insurance can also include two additional types of coverage to insure your property. They are known by the terms of extra-expense insurance and business interruption insurance. Business interruption insurance can protect your business from lost salaries, taxes, debts, and any other loss of profit due to damage to your business. However, extra-expense insurance can cover the relocation expenses of your business as part of a temporary alternative due to a covered peril.
No one wants to be financially impacted from a natural disaster, thus by acquiring property insurance can be a great idea for your business.