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Why Landlord Insurance Premiums Are Different from State to State

There are lots of reasons for Landlord insurance premiums to vary significantly from state to state.  And, when you, think about it, it is obvious.  But, let’s do a quick review, as often the obvious is overlooked.

 Rebuilding after a serious fire or wind event will incorporate all aspects of building and the commodities used for repair the property. Claims frequencies and severities vary from State to State.  For example: the status on Hail claims demonstrates one of the reasons why certain states’ insurance premiums, for structures, are so much more:  

  • According to the National Insurance Crime Bureau, which for some reason has this data, in 2010, there were 467,602 hail damage claims filed.
  • That number increased to 689,267 in 2011 and to 861,597 in 2012—an overall increase of 84 percent from 2010 to 2012.

In the U.S., severe storms (wind, tornado, hail) appear to be occurring with more intensity and affecting more areas of the country.   Over 2,000,000 hail damage claims were processed from January 1, 2010 to December 31, 2012. The top five states experiencing hail damage claims were

  • Texas (320,823)
  • Missouri (138,857)
  • Kansas (126,490)
  • Colorado (118,118)
  • Oklahoma (114,168). 

And, these states tend to have somewhat higher insurance rates, with Texas – a great state in which Landlords can invest and see significant positive cash flows – generally being the most expensive of the group. 

 Remember, however, that in Texas and much of the Midwest and Southeast, the damage resulting from these serious storms – with possible catastrophic implications (tornadoes, windstorms) – is included within their primary premium structures.  In places like California, for instance, the most catastrophic potential for claims – aside from wildfires – is the potential damage resulting from earthquakes.  Yet, California’s rates for Landlord Insurance are relatively cheap because Earthquake is not included in the base coverage offerings of the insurance policies. 

 In addition to claims frequencies and severities, you’ll see other obvious reasons for variations in insurance premiums: 

  • Labor Rates vary from State to State
  • With a rebuilding of a home, the architect fees will be a significant factor in the rebuilding cost, and these will vary a bit
  • The costs of general contractors who specialize in insurance repairs (contractors who work well with insurers) will vary from state to state.  Again, labor costs fall into the equation, as do insurance rates, and gasoline and other commodities will vary from State to State
  • Commodity prices (concrete is “gold”)

 There are other reasons for higher rates, but mostly, it all comes down to claims experiences and the cost of labor and materials – and how that translates to an insurance policy.  Where you live, where you invest:  the insurance costs reflect all of the factors of a particular area.  But, never let these issues get in the way of a good place to live or invest; just be sure to be adequately insured.


All stats courtesy of the National Insurance Crime Bureau and the Insurance Journal 7/23/13



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