Investors are often surprised—even shocked—to learn the cost of insurance on a particular invest- ment. Can you relate?
I’ve seen many investors estimate their cost of insurance based on what they’ve paid for another property. When they get their estimated insurance rate,
they struggle to wrap their head around the figure,
wondering why it’s so different than a similar property they invested in.
When it comes to insurance it’s important to know
that not all properties are created equal. Understanding key differences can make insurance premiums a
lot easier to navigate. Here are four factors that can
have a serious impact on your insurance costs.
1. HIGH RISK TENANTS
Did you know that the type of tenant you have in
your commercial property could affect the cost of
your own insurance? Property owners often don’t realize this and give little consideration to the type of
tenant to whom they lease their property. It’s only after they try to obtain an insurance policy that they’re
slammed with a higher-cost premium.
So, why exactly is it that the type of tenant you have
can drive up the cost of the insurance on your building? It all goes back to risk.
Picture this: You have a full-service restaurant as a
tenant on your commercial property with cooking
exposure, resulting in a higher risk of fire. The tenant’s insurance policy covers this higher exposure so
your insurance as a landlord won’t increase, right?
Wrong. The higher risk of a claim your tenants’ operations pose, the higher premiums you will pay —
the tenant’s insurance notwithstanding!
Property owners are sometimes surprised to learn
that the type of tenants they have can dramatically
increase their premiums. While some of these ten-
Beware of Factors That Will
Increase Your Cost of Investment
Real Estate Insurance
By Izzy Green