Is it possible to reduce insurance premium costs?
Insurance premiums can be a significant cost of property ownership, but insufficient insurance can result in financial disaster. The location, type, age, and construction quality of the subject property are the important factors in determining premium costs.
An experienced insurance agent can help a landlord decide the most important types of coverages, how high a deductible is acceptable to the landlord, and how large the policies should be. The overall net worth of the landlord may help determine the amount of liability coverage that is prudent. Each landlord must evaluate risks on a regular basis to help determine the potential property damage risks and the possible liability for injury or financial loss to others, then try to carry the appropriate insurance to deal with them.
The best way to minimize insurance costs is to provide only those coverages needed and to shop for the best premium for those coverages. However, when deciding which coverages are needed, it is important that a landlord not delete any important ones just to save a few dollars.
One of the primary ways and the least risky way to reduce premiums for hazard coverage is to increase the deductible. The maximum deductible that a landlord would want to consider depends on his risk tolerance; his financial condition, and for financed properties, the maximum amount allowed by a lender.
When purchasing insurance, a landlord must consider the available limits and deductibles by which he can help reduce his insurances costs while maintain adequate coverage for his business.
- Decide what perils to insure against and determine how much loss one might suffer from each.
- Cover the larger loss exposures first – Liability coverages should be at top of the list.
- Use as high a deductible as one can afford.
- Avoid duplication of coverages. Even if a landlord has several policies on a property one can still collect only the amount of the actual loss. All the insurers share the payment proportionately.
- Utilize package policies whenever possible.
- Periodically review insurance program to ensure that coverage is adequate and that premiums are as low as possible while providing adequate protection.
A landlord should consider insurance as a safety net for catastrophic events rather than making ownership risk free. Since an uninsured loss will be tax deductible, a loss equal to or less than the deductible amount will really cost a landlord the difference between the loss amount and the tax deduction resulting from that amount.