Landlord insurance is becoming more expensive, and it’s a trend that many property owners are feeling. Over the past few years, costs have surged, mainly due to increased claims from natural disasters. While the property insurance market is starting to stabilize, liability insurance is now the next big hurdle, especially for multi-family properties. These types of buildings often have higher occupancy rates and more foot traffic, which raises the risk of accidents.
So, what’s causing these changes? Insurance agents are now facing a tougher market. Liability coverage is entering a hardening phase, meaning that not only are premiums going up, but insurers are also tightening their underwriting guidelines. They are becoming pickier about the risks they will take on, often excluding certain types of coverage and adding limits to what they will pay out.
One of the main reasons for the rise in liability rates is the increasing cost of claims. It’s not just that there are more claims; the ones that do happen are costing more to settle. Lawsuits are leading to larger payouts, forcing insurers to raise rates and limit coverage options.
The legal landscape also plays a significant role. In some areas, laws favoring tenants can lead to more lawsuits and higher settlements. Even if a landlord wins a case, the costs of legal defense can be substantial, putting additional pressure on insurance rates.
Properties like hotels and multi-family buildings are particularly hard hit. If a landlord’s primary liability coverage runs out, they may need to rely on an umbrella policy, which can lead to even higher costs. This kind of layered payout is becoming more common, prompting insurers to reassess the risks they are willing to cover.
Not all properties are created equal when it comes to risk. Certain characteristics make some investment properties more challenging to insure, particularly:
- Urban properties in high-crime areas, which pose a greater risk of tenant injuries.
- Older buildings with outdated infrastructure that can lead to accidents.
- Short-term rentals with high guest turnover and less oversight.
- Properties featuring shared amenities like pools or gyms, which increase liability exposure.
As losses mount, insurance carriers are becoming more cautious. Many are stepping back from certain risks, especially those related to multi-family properties and those in high-crime areas. Insurers are also more selective about offering excess liability coverage, making it harder for real estate investors to secure additional protection.
For agents working in this tough market, it’s crucial to act early. Getting a head start on renewals and exploring different options can help clients manage rising costs. Educating clients about the reasons behind these changes can also help set realistic expectations.
Insurance companies are likely to favor submissions from agents they trust, especially when capacity is limited. Building strong relationships with underwriters can provide an edge in securing coverage. Working with specialized insurance program managers can also be beneficial, as they can help negotiate better terms and navigate underwriting challenges.
In this evolving landscape, staying proactive is essential for agents and their clients. With the right strategies, they can find success even as the market becomes more challenging.
REInsurePro, an insurance program manager focused on real estate investment insurance, offers various solutions to help agents face these challenges. They provide unique liability options, including coverage for canine-related incidents and carbon monoxide pollution, as well as higher liability limits and streamlined processes for connecting risks with suitable carriers.
As the insurance market continues to shift, understanding these trends will be key for both property owners and insurance agents alike.