High Property Insurance Creating Headaches for Landlords

By Douglas Katz – 10/03/23

Being a landlord and owning rental homes used to be a bit easier, but there’s something happening that’s making it harder: rising “insurance costs.” Imagine insurance as a shield that protects landlords and their rental properties. But now, this shield is getting more expensive, and it’s causing big changes for landlords.

Let’s take a closer look at why these insurance costs are going up and how it’s making life different for landlords. We’ll use simpler words and examples to help you understand.

Insurance Costs Going Up

So, what’s making insurance costs go up for landlords? It’s a bit like when you go to the store with your parents, and they notice that everything seems to cost more than it did before. That’s because of something called “inflation,” which means prices for almost everything are going up.

Now, imagine you have a treehouse, and one day, a strong wind knocks a few wooden planks loose. You need to fix it, right? But guess what? Fixing things, like the treehouse or houses that landlords own, is getting more expensive because of inflation. Since landlords have to pay for these repairs, they have to pay more for their insurance, just like your parents might have to pay more for groceries.

But there’s more to it. Even without inflation, the cost of repairs and the materials needed for them have been getting more expensive over the years. Think about it like fixing your bike. If you need to replace a wheel or a pedal, it costs more than it used to. For landlords, fixing things like the roof, the foundation, or the plumbing in their rental homes can be really expensive. And guess what? These added costs are making insurance more expensive for landlords too.

On top of that, there are natural disasters like hurricanes, wildfires, floods, and more. These big events can cause a lot of damage to homes, and when that happens, insurance companies have to pay a lot of money to fix everything. But when they pay out lots of money, it’s hard for them to make a profit. So, they end up raising prices for landlords to try to cover those costs.

Now that you know why insurance costs are going up, let’s find out what insurance companies are doing about it and how it’s affecting landlords.

  1. Prices Going Up Everywhere: Everything is getting more expensive because of something called “inflation.” This means it costs more money to fix things in houses when they break. Since landlords have to pay for these repairs, they have to pay more for insurance.
  2. Repairs Cost More: Even without inflation, fixing things in houses has become pricier over the years. If a roof, foundation, or plumbing has problems, it can be very costly to repair. And guess what? These added costs are making insurance more expensive for landlords.
  3. Natural Disasters: Hurricanes, wildfires, floods, and other natural disasters are happening more often. When these disasters damage homes, insurance companies have to pay a lot of money. This makes it tough for them to make a profit and leads to them increasing prices for landlords.
What Insurance Companies Are Doing

Because insurance companies are having a hard time, they’re doing a few things:

  1. Raising Prices: They’re making landlords pay more for insurance. This can be tough on landlords’ budgets.
  2. Less Coverage: Some insurance companies are giving landlords less coverage or not covering certain things anymore. This means landlords might have to get more than one insurance policy.
  3. Special Insurance: They’re offering special insurance for things like hurricanes, floods, or wildfires, but it costs more.
  4. Leaving Some Places: In some areas, insurance companies are leaving because they can’t make enough money. This leaves landlords in a tough spot to find insurance.
What It Means for Landlords

For landlords, these changes can be hard:

  1. Money Stress: Higher insurance costs mean landlords have to spend more money. This can make it harder to make a profit.
  2. Delaying Repairs: Some landlords are not fixing things right away to save money. But this can cause bigger problems later, and insurance may not cover it.
  3. Complicated Insurance: Landlords now have to deal with complicated insurance policies to make sure their properties are protected.
Finding Opportunities

But there’s a bright side too:

  1. More Properties Available: Some property owners might have to sell because they can’t afford insurance. This means more houses may be available for landlords to buy.
  2. Competition from Other Landlords: Landlords who can’t make money because of high insurance costs might want to sell. Other landlords can take advantage of this by buying more properties.
Adapt and Survive

Being a landlord in today’s world isn’t as simple as it used to be, and one of the main reasons is the high cost of insurance. Imagine it like this: being a landlord is like playing a game, and insurance is one of your tools to protect your properties in the game. But now, that tool is becoming more expensive, and it’s making the game a bit harder.

But guess what? Just like in any game, there are ways to adapt and even win, even when things get tough. Smart landlords, like clever players in a game, can still find opportunities and make the best of these changes.

Yes, insurance costs are a challenge, and they’re like a tricky level in the game. But with careful planning, learning about different strategies, and making smart decisions, landlords can navigate this level successfully. Some property owners might have to sell their properties because they can’t afford the high insurance costs. This means more houses may become available for landlords to buy and expand their game.

So, while being a landlord isn’t easy right now due to expensive insurance, remember, with the right moves, it’s possible to turn challenges into opportunities and continue to thrive in the world of real estate investment. Just like in your favorite games, with determination and smart choices, you can come out on top, no matter what challenges you face.

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