Protect Your Investment: Why Rent Robin Encourages Kansas City Property Owners to Shop Insurance Every Year
Owning rental property in Kansas City can be a powerful way to build long-term wealth, but successful real estate investing involves much more than collecting rent each month. Property owners must continually monitor expenses, protect their assets, evaluate market conditions, maintain their properties, and look for opportunities to improve the overall financial performance of their investments. At Rent Robin Property Management, we work with Kansas City rental property owners and real estate investors every day, and one expense we believe deserves much more attention is property insurance. Insurance is necessary. Overpaying for it isn’t. As insurance premiums continue to put pressure on property operating expenses, Rent Robin encourages owners to make reviewing and shopping their insurance coverage an annual part of managing their investment portfolio. Simply allowing the same policy to renew year after year may be convenient, but convenience doesn’t necessarily equal good investment management. At Rent Robin, We Believe Every Expense Deserves Attention When Rent Robin evaluates the performance of a rental property, rent is only one side of the equation. What ultimately matters to an investor is how the property performs after expenses. Mortgage payments, property taxes, maintenance, repairs, vacancy, turnover expenses, utilities, capital improvements and insurance all affect the profitability of a rental property. Insurance can be particularly easy to overlook because increases often happen gradually. Imagine a Kansas City rental property generating $1,600 per month in rent. If the annual insurance premium increases from $1,800 to $2,300, the owner has just absorbed another $500 in annual operating expenses. Now multiply that across a portfolio. Five properties with similar increases could mean an additional $2,500 every year. That’s $2,500 that isn’t being invested into property improvements, reserves or additional acquisitions. It simply becomes another expense reducing the property’s cash flow. At Rent Robin, we encourage our owners to look at the complete financial picture. If an expense increases substantially, it deserves attention — and insurance should be no exception. Why Are Property Insurance Premiums Increasing? Even property owners who haven’t filed claims can experience significant insurance increases. The National Association of Insurance Commissioners notes that property insurance premiums may be affected by extreme weather, increasing construction and repair costs, inflation, litigation expenses and reinsurance costs. Kansas City property owners may also face insurance considerations related to the age and condition of their properties. An insurer may consider factors such as the roof, plumbing, electrical system, heating system, construction materials and other property-specific characteristics when determining risk and pricing. This is particularly important in the Kansas City rental market. Rent Robin manages and works with properties throughout the metro, where housing stock can vary tremendously. One investor may own a newer suburban rental while another owns a decades-old home in an established Kansas City neighborhood. Different insurance carriers may evaluate those properties — and their associated risks — differently. That’s one of the reasons Rent Robin believes it makes sense to shop the market rather than assume your current insurance company remains your best option. Your Renewal Notice Shouldn’t Automatically Mean “Renew” Insurance is one of the easiest investment expenses to put on autopilot. The renewal arrives. The premium gets paid. Another year passes. Then another. Before long, a policy that once seemed reasonably priced may have increased substantially. At Rent Robin, we encourage property owners to treat an insurance renewal as an opportunity to review rather than simply a bill to pay. Compare your new premium with last year’s premium. How much did it increase? Was it 5%? 10%? 20%? More? Then ask why. The Missouri Department of Commerce and Insurance encourages consumers who believe their insurance costs are too high to shop around, noting that Missouri has a competitive insurance marketplace. Rent Robin agrees with that approach. Loyalty to an insurance company shouldn’t prevent a real estate investor from periodically testing the market. Rent Robin Recommends an Annual Insurance Review Just as rental rates should periodically be evaluated against current Kansas City market conditions, insurance premiums should periodically be compared against current insurance options. Rent Robin recommends making an insurance review part of your annual investment property checklist. Don’t wait until your premium becomes painfully expensive. Once a year, contact your insurance professional and consider requesting additional quotes from other reputable carriers or independent insurance agents. An annual review should answer two basic questions: Am I still paying a competitive rate? and Do I still have the coverage necessary to properly protect my investment? Both questions matter. Saving money is important, but Rent Robin would never recommend choosing insurance solely because it has the lowest premium. Cheap insurance can become extremely expensive when a loss occurs and the coverage isn’t what you thought it was. Compare Coverage, Not Just Premiums When Rent Robin talks about shopping insurance, we aren’t suggesting that investors simply choose the lowest number on a page. Insurance policies aren’t necessarily apples-to-apples comparisons. One policy might cost several hundred dollars less but include a substantially higher deductible. Another may contain different exclusions, lower liability limits or different provisions regarding replacement cost. Investors should understand exactly what they’re purchasing. Important areas to discuss with your licensed insurance professional may include: Dwelling/property coverage Liability protection Deductibles Replacement cost versus actual cash value Loss-of-rent or loss-of-income protection Roof coverage and depreciation Wind and hail deductibles Water-related exclusions or limitations Vacancy provisions Other structures Owner-provided appliances Umbrella liability coverage For rental property owners, loss-of-rent coverage can be especially important. If a covered event makes a rental property uninhabitable for an extended period, the physical repairs may only be part of the financial impact. The investor could also lose months of rental income. Rent Robin encourages owners to discuss these scenarios with a qualified insurance professional so they understand how their individual policy would respond. Watch Your Deductible Increasing a deductible may lower an insurance premium, but Rent Robin encourages investors to think beyond the immediate savings. Suppose increasing your deductible from $2,500 to $5,000 saves several hundred dollars per year. Is that worthwhile? Maybe. But could you comfortably absorb that $5,000