Some of our insurance policies have doubled, tripled, even quadrupled in the last 24 months. I’m not exaggerating. The premiums we’re paying on certain properties right now are four times what they were two years ago, and if you own rental real estate, you already know this isn’t just happening to me.
Here’s why it matters beyond just being annoying. Insurance is a direct expense — it hits your NOI. And if properties are valued on the income approach, meaning income minus expenses equals net operating income, then a premium that doubles doesn’t just cost you more money every year. It compresses your NOI, which drops your property value. It’s a double hit. Interest rates have done a number on property values the past couple of years, and insurance has been right behind them doing the same damage, just more quietly.
So I’ve been going through every single one of our policies. Here’s what I’ve been finding and what I’ve been doing about it.
The Flood Policy I Was Basically Lighting on Fire
I live on the beach in Charleston, South Carolina, so I carry two policies on my primary residence: the main property policy, which was running around $12,000 a year, and a separate flood policy at $8,500.
A couple of years back, a major storm came through Charleston — fifth largest storm surge in recorded history here, going back 200 years. It came close. Really close. And then it stopped. The dunes held it back, my house is elevated, and not a drop of water got into my yard. Both policies came up for renewal right around the same time.
I called my insurance guy, Drew Maconachy — absolute rockstar, by the way. I get nothing for saying that other than maybe he buys me a steak someday, which he hasn’t, but anyway. I walked him through the flood policy: $8,500 a year, $10,000 deductible, caps at $250,000, doesn’t cover anything on the ground level, which in Charleston is how most houses are built — elevated, with a lower level the policy basically ignores. My lender doesn’t require it. And we just had the fifth largest storm surge in Charleston history and it didn’t get in my yard. Why am I paying for this?
His answer was essentially: you probably shouldn’t be. If you don’t need it, don’t do it. Take that $8,500 and put it toward improvements that actually reduce your flood risk, or park it in reserves to cover small damages out of pocket. So I dropped it — $8,500 back in my pocket every year. And honestly, if I’d actually needed it, if flood waters had reached 12 feet and started hitting the lower level, the $250,000 cap wouldn’t have covered much of anything anyway. I would have been in a situation where my house potentially falls over and I get a $250,000 check. That’s not real coverage for a real catastrophe. Sometimes the right move is to take that premium money and build reserves instead.
The Deductible Move That Saved Me $2,000 a Year
Here’s something else Drew explained that changed how I think about deductibles. If you file a claim right now, most insurance companies will not renew you — that’s just the reality of the market. So if something happens and the damage is $16,000, you’re in a tough spot. You file the claim, they pay it, and then they drop you. When you go find a new policy, it costs more because you now have a claim on your record. Which means for anything under a certain dollar amount, you’re probably not going to file a claim anyway. So why are you paying premiums based on a low deductible you’re never actually going to use?
I raised my deductible on the main property policy from $5,000 up to $25,000, because the honest truth is I wasn’t going to file a claim for anything under $25,000 anyway. The premium dropped by almost $2,000 a year. That $2,000 goes into a reserve account, and if something costs $18,000 to fix, I pay it out of that account. I don’t file a claim, I don’t get dropped, and my premium stays where it is. This only makes sense if you have the cash reserves to back it up — don’t raise your deductible to a number you couldn’t actually cover — but if you have the means and you’re honest about what you’d actually claim, it’s real money.
The 36-Unit Building in Cleveland and the $20,000 Lesson
This one’s my favorite because it flips the way most people think about capital improvements.
We own a 36-unit building in Cleveland, Ohio — seventies vintage, so older electrical, older plumbing, older roofs. At renewal, the insurance company came back with a premium that had jumped by about $20,000 a year. The reason was stab-lock breakers on about ten of the breaker boxes. Stab-lock breakers are a specific type that insurance companies consider a fire risk, and even though it had never been flagged before, now it was costing us an extra $20,000 a year.
So I called the insurance company directly and asked: if we replace those breakers, does the premium come back down? They said yes. Called an electrician, got a quote to swap out all ten boxes, and because it was a bulk job the cost came in around $20,000. One-time expense, $20,000 in annual premium savings. We improved the building, reduced the actual fire risk, and every dollar saved on that premium shows up in NOI, which increases the value of the property when we go to sell. Instead of writing a $20,000 check to the insurance company every year and never seeing it again, we made a $20,000 capital improvement we own forever.
That’s the question I’m now asking at every single property: what does the insurance company see as a risk, and is there a capital improvement I can make that costs less than what they’re charging me in extra premium? Sometimes it’s breakers. Sometimes it’s the roof, the plumbing, or the HVAC. Whatever it is, run the math — a lot of the time, fixing the problem is a better investment than paying the inflated premium.
What to Actually Do With Your Policies Right Now
Here’s the process I’m running across our entire portfolio.
Use an independent broker, not a captive agent. A captive agent only writes for one carrier, so you’re not really shopping — you’re just renewing. An independent broker can take your policy out to multiple carriers at once and find the best combination of coverage and price. If you haven’t done this, start here.
Read the policy. I know nobody does this, but do it anyway. Go line by line through every coverage and ask your agent what it covers, when it actually pays out, and what it excludes. The exclusions are what matter most. If your policy won’t cover flood, wind above a certain speed, or a slow water leak, and those are your most likely risks, you’re writing a check to a company that’s going to deny your claim when you need it most.
Drop what doesn’t apply. Watercraft coverage when you have no boats. Vehicle coverage when you don’t live there. Line items that exist because they were on a template and nobody ever reviewed them. Every dollar of unnecessary coverage is a dollar you’re donating.
Raise the deductible if the math works. If you have reserves and you’re honest about what you’d actually claim, a higher deductible means a lower premium. Put the difference in a reserve account.
Ask the capital improvement question. Every renewal, ask your broker what the insurance company sees as the biggest risks on the property and what improvements you could make to bring the premium down. Then run the math. Capital improvements that reduce your premium have a calculable payback period, and they add value to the asset at the same time.
Why This Matters More Than Most Operators Realize
A $10,000 reduction in annual insurance expense isn’t just $10,000 a year. At a 6% cap rate, that’s $166,000 in increased property value. Do that across ten properties and you’ve added over $1.6 million in asset value just by reviewing your insurance policies. That’s not a minor optimization — it’s a meaningful swing in net worth, and it comes from doing something most operators are too busy to do: actually looking at what you’re paying for.
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This post reflects my personal experience managing 2,000+ apartment units across the US. It is not legal or financial advice. Insurance requirements and coverage options vary by state, property type, and lender. Always consult a licensed insurance professional before making changes to your policy.