Having an investment property and being a building owner is no easy task. We know first hand all that goes into this line of work – we’re landlords ourselves. Paying taxes, doing home maintenance and getting renovations are just a few of the costs involved in managing rental property in Brooklyn. Even though the building is a home, it needs to be protected like a business.
Homeowner’s insurance can cover homes occupied by the owners. For properties that you rent out — you will need to get landlord insurance.
Cost of Landlord Insurance in Brooklyn
Giving a general statement about the cost of landlord insurance doesn’t properly take into account all of the different factors that go into quoting a landlord insurance policy. Some websites will say that it’s 20% higher than homeowners insurance, but that doesn’t address mixed-use buildings or other building owner situations.
When preparing a quote we first look at the Loss Runs for the last 3 – 5 years to better understand the building’s Loss History. From there we factor in the type of building: is the property mixed-use with commercial tenants, or is it purely residential, and if so how many tenants are in the building.
At that point, we start to look at the square footage, and this is the point when we can start talking about the average cost of landlord insurance. Barring irregularities in the Loss Runs or dealing with high claim commercial tenants, landlords are looking at about $250 – $350 per square foot for the replacement cost as a starting point based on the agreed-upon value.
Landlord insurance significantly costs more as it often involves bigger structures and greater liability risks. Rental property owners may also pay more for their premiums when they offer short-term rentals as tenants are less likely to care for the property.
These are all general quotes until the building passes inspection (more on what is inspected in a minute).
In Brooklyn, they calculate your insurance premiums based on several factors:
- Square footage
- Age and condition of the property
- Number of rental units
- Known geographical risks such as a hurricane, flood plains
- Presence of fire sprinklers
- Security measures such as burglar alarms, fences, cameras and gates
- Whether you rent to smokers or not
- Whether or not the electrical wiring is up to code
- Type and amount of coverage
It could range from a few hundred dollars per year to several thousands of dollars, depending on the type of rental property you own, and if you rent it full-time or seasonal. Expect to pay more if you own a large complex with amenities such as a swimming pool and a fitness center.
Understand What is Included in Your Insurance Coverage
There are two types of protection that you can get for your property: one that covers the physical structures of your dwelling and a policy that offers liability protection.
We recommend comprehensive insurance policies to make sure that your business is properly protected. You want to make sure they include coverage for property damage, loss of rental income, liability protection, personal property, and medical payments.
Dwelling Coverage or Property Damage
Coverage for all risks including natural disasters, water damage, earthquake, fire, irresponsible or vandalism. This policy is the most expensive but also highly beneficial for you.
Loss of Income
You will be reimbursed for the money you would have earned when a tenant is occupying the property. Your loss should be equal to the gross rents to get paid.
This is for any personal property used such as a security camera.
Reimbursement for medical costs you have incurred.
Protection for any lawsuit or any legal costs.
Passing Inspection and Saving on Coverage
When trying to get landlord insurance your building must be up to code on a lot of key areas. The insurance coverage can get significantly more expensive, or difficult to get if your building neglects to address the following criteria:
- Breaker boxes – If your building has a FPE Stab-Lok breaker box you will need to replace it to pass inspection. This can get pricey if your building has multiple breaker boxes of this kind.
- Conditions of sidewalk – Making sure your website is up to code can also be a focus point of an inspection. It doesn’t take an inspector to know if you have an unusable sidewalk for tenants and pedestrians.
- Handrails – Wherever there are 3 or more steps on the property, handrails need to be installed for the safety of tenants and guests.
- AC brackets – If tenants use window air conditioning units, the landlord may be required to add safety brackets to those windows for the safety of passersby.
- Emergency lighting – For buildings with 4 floors or more, there needs to be both emergency lighting in the hallways and light up exit signs.
If you want additional advice on your landlord insurance, it’s best to speak with your agent. Some common riders include flood insurance, guaranteed income insurance, emergency coverage and construction expenses. You may also consider adding a separate umbrella policy especially if you have a high net worth. It ensures that whoever is suing you won’t have a hold over your personal assets.
Before purchasing an investment property, it’s essential that you fully understand the insurance requirements. As insurance advisors, we are happy to offer you assistance as you search for properties on your path to being a building owner.