Insuring a rental property

[holymoly]

Hi everyone,

This is my first question on the forum. I`ve already learned so much from reading your posts, and from Don`s books!

I hope this isn`t a stupid question, but how do you estimate insurance costs for an investment property? I`m trying to buy a house in Hamilton to rent out. I know the insurance cost will depend on the specific property, but what do you plug in as an estimated insurance expense when you`re looking at the numbers to help you decide if a place is worth buying (or even seeing)?

Also, if you have advice related to insurance, I`d really appreciate hearing it. The whole idea of insurance worries me. I`ve heard it`s hard to get it on a rental property. (I keep thinking `What if I buy a place and then can`t get insurance or it costs an arm and a leg?!`)

Thanks!!

 

[spike9294]

QUOTE (holymoly @ May 7 2008, 09:38 PM) Hi everyone,

This is my first question on the forum. I`ve already learned so much from reading your posts, and from Don`s books!

I hope this isn`t a stupid question, but how do you estimate insurance costs for an investment property? I`m trying to buy a house in Hamilton to rent out. I know the insurance cost will depend on the specific property, but what do you plug in as an estimated insurance expense when you`re looking at the numbers to help you decide if a place is worth buying (or even seeing)?

Also, if you have advice related to insurance, I`d really appreciate hearing it. The whole idea of insurance worries me. I`ve heard it`s hard to get it on a rental property. (I keep thinking `What if I buy a place and then can`t get insurance or it costs an arm and a leg?!`)

Thanks!!


Hello, this is my first reply, hope I am doing right.

I asked my insurace broker the same question and this is what hr told me.

If your buying several properties, you should have a commercial liability policy, this includes retail and residential properties.

It is possible to include up to six units on your home policy, more then that have be on a commercial policy.

My broker gave me the following examples for estimating insurance cost, liability and building replacement.

2 plex, worth $180,000 would cost approx $350 - $500 per year.

6 plex, worth $750,000 would cost approx. $750 - $1000 per year.

Age and condition of the building will be a factor, but insurance in general is reasonable.

I reccommend you contact an insurance agent in your area and see how your numbers compare to the information I received, I would be interested to hear your results. Good luck.

Mike Finlan

 

[Dejavu]

QUOTE (holymoly @ May 7 2008, 10:38 PM) Hi everyone,

This is my first question on the forum. I`ve already learned so much from reading your posts, and from Don`s books!

I hope this isn`t a stupid question, but how do you estimate insurance costs for an investment property? I`m trying to buy a house in Hamilton to rent out. I know the insurance cost will depend on the specific property, but what do you plug in as an estimated insurance expense when you`re looking at the numbers to help you decide if a place is worth buying (or even seeing)?

Also, if you have advice related to insurance, I`d really appreciate hearing it. The whole idea of insurance worries me. I`ve heard it`s hard to get it on a rental property. (I keep thinking `What if I buy a place and then can`t get insurance or it costs an arm and a leg?!`)

Thanks!!

I called the insurance company we have our home policy with and asked them for a quote before we bought the investment property. After getting a quote you are still able to shop around, but a quote gives a pretty good idea for estimating costs.

 

[ccameron]

I always include the condition-obtaining commitment from home insurance- in my offers to purchase. I also email my agent a copy of the listing. This is an area where you want to have a comfortable working relationship with your agent. Find one who is both encouraging and understands the business of property investing. Remember you are the customer here and if one company fails to meet your requirements there are plenty others who would be pleased to accomodate your insurance needs. I was also cautioned by someone in the know, not to supply a copy of any home inspections that you have done to your insurance company. let them do their own due diligence as they may use the very info. that you give them to site problems that may otherwise be unnoticed.Hope that was helpful. All the best chris CameronQUOTE (Dejavu @ May 9 2008, 12:50 PM) I called the insurance company we have our home policy with and asked them for a quote before we bought the investment property. After getting a quote you are still able to shop around, but a quote gives a pretty good idea for estimating costs.

 

[holymoly]

Thanks very much, everyone, for the information and advice!

 

[holymoly]

I placed a conditional offer on a small single family home, just over 1000 sq ft -- I emailed the listing to my insurance agent and got a quote of just over $1000/year including gst. Wow. Sounds like a lot to me, though my accountant thinks its reasonable. It includes $2-million liability and rental loss (if the building burns down, for example.) Maybe it`s more than the figures noted above because of the age, about 100 years old...?

 

[ccameron]

QUOTE (holymoly @ May 21 2008, 12:17 AM) I placed a conditional offer on a small single family home, just over 1000 sq ft -- I emailed the listing to my insurance agent and got a quote of just over $1000/year including gst. Wow. Sounds like a lot to me, though my accountant thinks its reasonable. It includes $2-million liability and rental loss (if the building burns down, for example.) Maybe it`s more than the figures noted above because of the age, about 100 years old...?

Hi Holy, I generally pay between $400-$ 500 for properties of that size. That price does not however include rental loss, which I was told to add aprox. $50.00/per year per property. Hope that helps. Chris

 

[holymoly]

QUOTE (ccameron @ May 21 2008, 09:21 AM) Hi Holy, I generally pay between $400-$ 500 for properties of that size. That price does not however include rental loss, which I was told to add aprox. $50.00/per year per property. Hope that helps. Chris

Wow, that`s a big difference from $1000/year! Thanks for the info.

 

[Marek2086]

Be careful I have a 5 plex and the cheapest insurance I got was 2,900 1M liability w 350k coverage so it also depends on what area and who your tenants are and if they have their own insurance. I was just quote 4 plex at 1200 w/ 2M liability 280k coverage. It depends on the area

 

[holymoly]

QUOTE (marek5 @ May 30 2008, 11:06 PM)
Be careful I have a 5 plex and the cheapest insurance I got was 2,900 1M liability w 350k coverage so it also depends on what area and who your tenants are and if they have their own insurance. I was just quote 4 plex at 1200 w/ 2M liability 280k coverage. It depends on the area


Thanks. I'm looking at 2M liability and $240k coverage -- not so different from your 2M/280k, though my 1000sf single-family row house has got to be a lot smaller than your 4-plex. But I suppose I can't argue with my insurance company on how much it costs to rebuild a place.



The $1002+tax quote I got is based on $500 deductible. It would be $812+tax for $2500 deductible.



What do most people choose for deductible on their rental properties, especially single-family?

 

[Sarnia]

QUOTE (holymoly @ May 31 2008, 01:24 PM) Thanks. I`m looking at 2M liability and $240k coverage -- not so different from your 2M/280k, though my 1000sf single-family row house has got to be a lot smaller than your 4-plex. But I suppose I can`t argue with my insurance company on how much it costs to rebuild a place.

The $1002+tax quote I got is based on $500 deductible. It would be $812+tax for $2500 deductible.

What do most people choose for deductible on their rental properties, especially single-family?

The deductible you choose should be based on what you can afford on a moments notice. If you can come up with $2500 tomorrow because a loss occured, then you should be okay with a $2500 deductible. If you can only come up with $500, then pay the few extra dollars until you are in a position where you can afford a higher deductible. With rental units, the area can come into play, certain areas have higher premiums based on acturial statistics. Make sure you have your broker complete a proper evaluation of the home, especially rentals as there is no guaranteed replacement cost. Also, I would sugggest you take the initiative to have these numbers reevaluated every 3 years at min, or if you are in a town that is booming, and costs are increasing you may want to revisit it. Let your broker know also if you do any improvements, ie upgrade wiring from 60 amp to 100 amp, etc There can be surcharges applied due to the age of a dwelling. Remember different brokers and different companies can offer alternative options, check around and be sure to ask your broker where there insurance is and why.

 

[holymoly]

That all sounds like great advice. Thanks a lot.

 

[nepoez]

Hi All,

I just want to throw in another question. If I only purchase apartments and town houses what kind of policy should I obtain?

 

[Sarnia]

QUOTE (nepoez @ Jun 17 2008, 08:56 AM) Hi All,

I just want to throw in another question. If I only purchase apartments and town houses what kind of policy should I obtain?

If you purchase the entire apartment you would be looking at commercial insurance. If you are buying individual townhomes/condos within an apartment, the building insurance is carried by the condo board. However to protect your investment, I would suggest talking to you broker about a policy for a rented condo. This can help you out in a few ways, - if the condo board had inadequate insurance, or if a loss assessment occured because of an insured loss to the building you should have coverage for that as well, include rental income coverage if you cannot cover off your mortgage payments. Coverage can vary company to company and province to province, but make sure you have a good knowlegeable broker. There is no problem not insuring for something ie rental income as long as you are aware that there is coverage available and you don`t want it. But talk to your Broker, and don`t be shy to ask how many companies they deal with, also they will have more pull with whichever company they write the most with, very much like Peter and his mortage companies. Also, one last point, some condos/townhomes you are responsible for insuring the building, and at that point you would need a different type of policy. I won`t bore you with the insurance jargon, but make sure you talk to your broker.

 

[nepoez]

QUOTE (Sarnia @ Jun 17 2008, 08:49 AM)
If you purchase the entire apartment you would be looking at commercial insurance. If you are buying individual townhomes/condos within an apartment, the building insurance is carried by the condo board. However to protect your investment, I would suggest talking to you broker about a policy for a rented condo. This can help you out in a few ways, - if the condo board had inadequate insurance, or if a loss assessment occured because of an insured loss to the building you should have coverage for that as well, include rental income coverage if you cannot cover off your mortgage payments. Coverage can vary company to company and province to province, but make sure you have a good knowlegeable broker. There is no problem not insuring for something ie rental income as long as you are aware that there is coverage available and you don't want it. But talk to your Broker, and don't be shy to ask how many companies they deal with, also they will have more pull with whichever company they write the most with, very much like Peter and his mortage companies. Also, one last point, some condos/townhomes you are responsible for insuring the building, and at that point you would need a different type of policy. I won't bore you with the insurance jargon, but make sure you talk to your broker.




thank you!

 

[BobHudson]

Insurance is not that scary - unless you are looking at a student rental or rooming house Or, more generally, 4-5 unrelated persons under the same roof. That`s when it can get expensive. And your regular insurer may not even want to touch that one.

So keep that in mind when looking at the numbers for those kind of properties.