How To Save Money On Your Property Insurance Rates (things that will cost you more for insurance)

Category: Business Strategies
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Posted on: 05/04/2008
Posted by: Brian Lucier
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These are some of the things that insurance adjusters are on the lookout for that could raise the amount you are paying for the insurance premiums for your investments. Recently at our April NWCLA monthly meeting, we had the pleasure of having three guest speakers from the insurance agency come down to talk in an open forum to our group.

Speaking at the April meeting were David Lashua, Stephen A. DeCarolis and Scott Simpson. David H. Lashua repesented Lashua-LaChance & Poliks Insurance Agency, Inc, email to: DavidLashua@Lashua-LaChance.com. Stephen A. DeCarolis and Scott Simpson represented DeCarolis Insurance Agency, Inc. You can contact Stephen and Scott at their email to: sdecarolis@decarolisinsuranceagency.com or to ssimpson@decarolisinsuranceagency.com.

The topics of discussion ranged from ways to avoid being canceled from insurance, keeping off the “bad property” lists, saving money on annual premiums, and how to get your property off of the “bad list” if it is already on there. After the meeting I had a chance to poll the members who attended the meeting. Based upon the information that was shared with our group from our three insurance professionals, we found that if even just the members that were attending that night, put into practice the information that was shared - they could collectively realize a savings in annual premiums of over $16,000 dollars. Those are some pretty impressive results!

So how do you do it?

How do you save the money? Residential/Commercial insurance rates are competitive. What you pay depends on many factors. The more you control those factors, the more you control what you pay for insurance. Here are a list of what the adjusters see, and where you can take control.

Building Updates

1. Heating Systems - Gas on Gas stoves are some pretty old units and in need of updating if you still have them. These are more common up north here in New England. Upgrading to Central heating systems is more cost efficient and will save you a few points on your insurance. Make sure to let the agent know when you make efficiency upgrades.
2. Roofing - When was it last updated? How many years ago was it serviced, replaced, updated. Keep records of your repairs on a regular basis.
3. Plumbing - Water damage claims can be more than a disaster to your plumbing. Up here this winter there was an avalanche of frozen pipes, water and icing damage that has got some policy premiums though the roof, or even worse, canceled. Also it would be good to know your policy too. What is covered if a pipe breaks, and what is not covered, might make you think twice before picking up that phone to file a claim.
4. Electrical - Circuit breakers vs. Fuses - This is another red flag when adjusters come out for that annual inspection of your property. If they see fuses, there are some pretty good odds that there may be some active knob and tube wiring still active in the building. They can enforce the upgrade in service to keep your coverage.
5. Alarm systems - Central station alarms can also reduce your premium if your building has a security system in place. Again make sure to let your insurance agent know about these upgrades to reap the full benefit on your premium.

Building Maintenance

1. Paint & Siding - Keep your units in tip-top shape. Fresh paint on the exterior protect the building from damage and rot which can reduce further damage that could lead to a claim. Siding is a great cost effective way to keep the building free from damage from neglect, with low maintenance. I personally prefer vinyl siding, over aluminum, and prefer siding over paint.
2. Chimneys - Get these professionally cleaned, and again let your agent know about it with documentation. This can reduce your risk of chimney fires, which can destroy more than your chimney.
3. Walkway & Sidewalks - Keep the areas free from trip and fall hazards. Uneven walks or cracked walks should be repaired and maintained regularly. But be careful not to repair city property or you become liable for the repair. If the sidewalk is cracked, get on your county DPW to repair the walk.
4. Snow Removal - Indigenous to the Northern States, snow and the liability it brings with it can be a problem. One way to minimize the risk is to have a contract with your snow removal person stating their liability for slip and falls. Make sure it states that they are liable because you pay them for plowing and snow removal, and make sure they sign it. A copy of this contract to your insurance broker can save you some risk consideration.

Tenants - Liability Issues

1. Animals - The types of dogs you allow on your property can raise or even cancel your insurance. (look for this list on an upcoming blog). Bite hazards can be serious. If a dog from your property runs into the street and causes an accident, you are liable even if it's not your dog.
2. Smoking - If you choose to, you can put into effect a no smoking policy in all of your units. Just make sure this is across the board so you aren't called out on discrimination. Again let your agent know this is in effect at your building.
3. BBQ Grills on decks - Other than stating the obvious about fire hazards, make sure this ends up in your lease where and where not to put grills. Have the tenant sign the agreement (have it in your lease) and make sure to pass a copy along to your agent.
4. Tenants insurance / Tenant Relocation expense - It is always a good idea to remind tenants that damages caused by them, need to be paid by them. Having renters insurance for the one-time event that the hose pops out of the clothes washer, will be worth it. That one repair alone could cost more than a whole year of renter's insurance. And if you have to file the claim for water damage, look out!

Co - Insurance

1. How does it work - Co Insurance is an additional policy to your normal coverage to cover a special situation having to deal with that property. For instance, we own a turn of the century multi-family Victorian that has some amazing details and features. One of which is a built in china cabinet which has the original spun glass and Masonic cast and engraved hinges. As well as two immaculate tin work ceilings in mint condition. These details are irreplaceable because this is a lost art and you can just find contractors hanging around who do tin ceilings anymore. To cover this would take co-insurance.
2. Actual Cost Value vs. Replacement Cost - Today's building and materials costs are sky high. In the example above with the tin ceilings, it would cost far more to replace with the original materials than to just build with sheet rock and studs. This would have to have the additional policy to cover those details.
3. Co-insurance Penalties - If you had the policy and something happened where you were going to receive funds. Be careful to use the money for what it was intended for. If the insurance company shelled out the cash to actually have tin ceilings recreated, they better be there in place when they come around again for inspection after the project repairs have been completed.

So there you have it. If you take the time to analyze your current policies, your buildings, and see what can be tweaked you - can probably save hundreds of dollars a year on insurance premiums. One more tip that saved our group $16,000 dollars. Raise your deductible for filing a claim. If you currently have a common deductible of $500 dollars , call your broker immediately to raise that to as high as you can bear. $1,000 to $5,000 will get you a significant drop. Let's face it. If you get some damage for a couple of thousand dollars, it's not worth it to even file that claim because it raises the point on your property for the "bad list". We would probably just suck up the expense of the repair and avoid the claim all together. One of our members has a deductible of $40,000 dollars which they would admittedly only use if there was a fire and the building was a total loss. They are paying under $2,000 a year for over 30 rental units.

So what can we save as Real Estate Investor.com?

Well let's figure that we probably have about 8,000 plus members by now and headed towards 10,000 very soon. If the average investor only initiates a few of these items on the list above, they will probably save a couple hundred dollars a years on premiums. If you multiply this out by the number of members' potential savings, that comes in around $160,000 dollars of savings per year on insurance premiums. Not too shabby at all.

If you liked this post and found it useful, let me know by rating it and dropping my a line.

Brian Lucier

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How To Save Money On Your Property Insurance Rates (things that will cost you more for insurance)

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