It’s more expensive than ever to insure your King County rental property.
Rising insurance costs are not unique to real estate investors. Throughout the state of Washington, insurance premiums have gone up for home insurance, auto insurance, and health insurance. Most consumers are cringing at double-digit increases year over year.
The office of the insurance commissioner approved an average base rate increase of 21.7% for home insurance and 17.5% for auto insurance, based on the average of the state’s 20 largest insurers.
Ask the insurance companies to explain these increases, and they’ll tell you that the costs to repair homes and cars have risen dramatically. That’s not untrue; if you’ve had to make any rental property repairs lately, you’ve surely noticed how much more expensive it is to hire a plumber or call in a drywall expert.
We’re not expecting rates to fall anytime soon. But, insuring your rental property is non-negotiable. So, many investors and landlords have come to us with the obvious question: how can investment properties be protected and money saved?
As your Real Estate Gladiators, we’ve always seen ourselves as your first line of defense against any threats to your property or your profitability. So today we’re taking a look at the insurance costs that are plaguing everyone these days and offering some solutions that can keep your investment portfolio strong. Let’s limit your risk and protect the value and condition of your most valuable assets.
Regulation and Protection: Resources for King County Real Estate Investors
No one likes to hear this when the higher insurance bills roll in, but the simple fact is this: It could be worse.
States like California and Florida are facing increasingly desperate times. Not only are insurers leaving those states, but the cost to protect a property is nearly out of control. One of the ways that experts measure the availability and affordability of insurance policies is by looking at how many property owners have had to turn to insurer-of-last-resort programs. These are tools provided by states that insure people who simply cannot get a policy in the standard market.
Check out these statistics from the Washington State Office of the Insurance Commissioner, and you’ll see what we mean:
| Florida insurer-of-last-resort policies: 1.3 million | California insurer-of-last-resort policies: 410,000 | Washington insurer-of-last-resort policies: 289 |
Again, this doesn’t exactly soothe the pain of higher premiums. But if we’re comparing Washington to other states, we have not quite reached the fever pitch just yet.
There’s a new insurance commissioner in place now, and she takes over from an individual who had served in the role for more than two decades. Washington’s new commissioner is a former state legislator and she ran on a platform that called for addressing the impacts of climate change on home insurance.
That doesn’t promise a quick fix, but in an interview with the Seattle Times, Commissioner Patty Kuderer said her office would be looking at any premium increase applications very thoroughly, to ensure that they are actuarially sound.
Know the Law
Did you know that a new law passed last June requires insurers to be more transparent with their customers around rate increases? It’s a law that is being implemented in two parts. Here’s what it looks like, and how you can leverage it to get a more transparent understanding of what you’re being charged for insurance, and why rates might be increasing.
|
Effective June, 2024: If you go to renew an insurance policy and there’s a premium increase, the insurance company must provide a “reasonable explanation” for why the cost has gone up, and that explanation must be done in writing. Customers can request this explanation by mail or email. The law also requires insurers to use language that is “understandable to an average policyholder.” The rule was established to allow policyholders to understand the basic context of their premium increase. There’s more. Insurers must let policyholders know they can ask for this. The invitation to request this information must appear in 12-point bold font on the first page of renewal notices or billing statements. Companies have 20 days from receiving a written request, by mail or email, to respond. |
Effective June, 2027: After June 1, 2027, additional requirements are in place. At this point, insurance companies must send policyholders a notice by mail or email at least 20 days before renewing a policy with a premium increase of 10% or more. Each notice has to list the criteria used in calculating the new premium and contributing to the hike. These reasons will likely include claims history, discounts, fees and surcharges, as well as the policyholder’s age, credit history, education, gender, marital status, and occupation. For property insurance, a property’s age, location, and value are among the variables used in calibrating a premium. |
This won’t necessarily bring down your premiums. But at least your insurer will be required to share why the price has risen.
Protecting Your Investment with a Strong Landlord Policy
The rising costs of insurance might leave you feeling like it’s time to scale back on your coverage.
That’s not what we’d recommend.
The threats are real, and they are increasing. It’s hard to watch the devastation of southern California’s recent wildfires and shrug off the need for a comprehensive plan.
An insurance policy is more than just paperwork. It’s a safety net. Unexpected challenges can arrive when they are least expected and certainly not invited.
Your landlord insurance policy is designed to address the unique risks posed by renting out a property. From physical damage caused by natural disasters to liability claims and tenant-related issues, this coverage works as a shield against unforeseen incidents that could cost you thousands of dollars or even lead you to lose your investment entirely.
Key Coverage Features of a Landlord Policy
| Property Damage Protection
Covers damages caused by fire, wind, vandalism, or other covered disasters. |
Liability Coverage
Protects you from legal or medical costs if a tenant or visitor is injured on your property. |
| Loss of Rental Income
Compensates you if your property becomes uninhabitable due to a covered event like water or fire damage. |
Tenant-Related Risks
Offers optional add-ons for issues like wrongful eviction claims or legal disputes arising from tenant lawsuits. |
Having a strong landlord policy ensures your investment is protected, so you can focus on building long-term success and growing your rental income.
Leaning Local: The Unique Challenges of King County Rentals
King County presents its own set of challenges for landlords when it comes to insurance. Not only are there the rising costs to contend with, but the growing risks from fires, floods, and other unseen challenges can quickly mount. Here’s what’s unique about our market and how investors might find insuring and protecting their properties a bit of a challenge:
- Regulatory Compliance. Washington state laws favor tenant rights. This means landlords must follow strict rules for evictions, security deposits, and tenant screening. If there’s a need to remove your tenant, for example, in order to take care of any repairs and replacements that result because of a covered loss, there will be some logistical planning required and potentially extra costs.
- Natural Risks. King County properties may face risks like earthquakes and heavy rainfall, which could cause damage if not properly insured. We work hard as your Real Estate Gladiators to stay on top of the threats that are constantly evolving.
- Tenant Turnover. With fluctuating rental demand, you may deal with frequent tenant changes. A solid landlord insurance policy with loss-of-income coverage can provide a financial buffer if there are vacancies that come from a covered loss.
Knowing these local challenges, a landlord insurance policy customized to address King County’s specific risks will provide peace of mind. If you don’t have a great insurance agent who you can trust, ask us for a referral. We work with some great professionals.
How to Choose the Right Landlord Policy
The right policy can vary depending on your property type, tenants, and budget. Here are some steps to guide your decision-making.
| Assess Your Property
Start by understanding the unique needs of your rental property. For instance, a single-family home may require different coverage than a multiplex with multiple tenants. Assess and evaluate before you bring your business to an insurance agent. |
Compare Policy Features
Look for policies that include crucial protections like liability coverage, property damage, and optional add-ons such as rental income protection. There’s a huge range when it comes to the policies available to King County rental property owners. Measure them against each other. |
| Consider Bundling Options
If you own multiple rental properties, bundling policies can streamline management and often provide discounted rates. An umbrella policy can often be cost-effective and offer a bit more protection for each property and your entire portfolio. |
Review Your Policy Regularly
Your needs may evolve as your rental property portfolio grows or as state laws change. Regularly reviewing policies ensures you maintain adequate coverage. Remember that as your property increases in value, your insurance coverage has to keep up. |
Work with a local insurance agent who can provide personalized guidance based on King County real estate conditions.
Requiring Renters Insurance
Renters insurance is a type of policy that covers a tenant’s belongings and provides liability protection. Typically, renters insurance includes:
- Personal Property Protection. Covers the tenant’s belongings in case of theft, fire, or other covered events.
- Liability Coverage. Protects tenants against potential lawsuits if someone is injured in their rental unit.
- Loss of Use Coverage. Covers additional living expenses if the rental home becomes temporarily uninhabitable after a covered event.
There’s still a bit of a misconception among tenants that their landlord’s policy would cover any of their own possessions if there’s a fire or a flood or some other sort of catastrophe that leads to the destruction of their electronics, furniture, or clothing.
Not true.
Your policy as a landlord covers the property itself and anything you own inside of that property (like appliances). It does not provide coverage for your tenant’s belongings.
Explain this to your tenant if there’s any pushback against your requirement for renters insurance. It’s mostly for their own protection.
But it benefits you, too, as the property owner.
4 Ways Renters Insurance Benefits Landlords and Protects Your King County Rental Property
|
Financial Protection Against Tenant-Caused Damages Accidental damages caused by tenants, such as fire or flooding, can lead to costly repairs. While your landlord insurance may assist in covering structural damages, requiring tenants to carry renters insurance ensures their policy can handle some of the associated costs. This reduces financial liability and prevents you from bearing unnecessary expenses. For instance, if a tenant leaves a candle burning that causes a fire, their liability coverage can pay for damages to your property. This added layer of protection keeps your investment safer and avoids unnecessary disputes over damage costs. |
Reduces Legal Risks Renters insurance reduces legal tensions between you and your tenants, and this is an important part of nurturing a positive and professional relationship with the residents you’re hoping to keep in place. If a tenant is liable for damages or if their guest sustains an injury on the property, their renters insurance policy can cover the bills. Without it, you may find yourself involved in time-consuming and expensive legal battles. Highlighting renters insurance as a lease requirement establishes clear expectations, protecting both you and your tenant from potential lawsuits. |
|
Promotes Tenant Responsibility Requiring renters insurance communicates that you value responsibility and transparency. Residents who purchase a policy are more likely to understand their role in protecting themselves and the property. By setting this standard upfront, you’ll typically attract more professional and reliable renters, which translates to fewer management headaches. |
Maintains Your Property’s Value Accidents, whether it’s a kitchen fire or a plumbing mishap, can result in significant repair work. The faster these issues are resolved, the less impact they’ll have on your property’s value. Renters insurance quickens the claims process, ensuring repairs are funded without delays. By maintaining your property in good condition, you’ll ultimately protect its long-term value. |
If you’re looking to adopt this policy for your King County property, here’s how to get started:
1. Update Your Lease Agreements
Clearly outline renters insurance as a mandatory requirement in your lease terms. Specify the minimum level of coverage you expect tenants to maintain (e.g., liability coverage for $100,000).
2. Verify Insurance Proof
Request proof of insurance before tenants move in. This can be a copy of their policy or an insurance declaration page.
3. Recommend Competent Providers
Make it easier for residents by recommending trusted renters insurance providers. These policies are actually a lot easier to find than general insurance policies, and a lot of companies allow residents to bundle their renters insurance with their auto insurance, keeping things even more affordable for them.
4. Send Reminders for Policy Renewal
Encourage tenants to renew their policies annually and provide an updated copy to you. Automated reminders can simplify this process.
Building Trust Through Transparent Policies
Some landlords may worry that requiring renters insurance could deter potential tenants. However, when presented appropriately, this requirement can actually help build trust. By explaining the mutual benefits—such as protecting their personal belongings or covering accidents—residents will view this as a safeguard rather than a burden.
Sound Maintenance Policies Protect Your Investment
Let’s not forget that you can do a great job of protecting your investment property even outside of insurance. While having a comprehensive policy is essential and absolutely required, not having to use that policy is the goal.
Make preventative and proactive maintenance a priority, like we do as your King County property management team.
| Prioritize Preventative Maintenance
A great way to protect your property is to keep it well-maintained. This requires immediate attention to emergency maintenance and a consistent response to routine repair requests. It also means paying attention to preventative maintenance. When you have your HVAC system inspected and serviced once or twice a year, for example, you’re going to extend its lifespan and have the peace of mind that it’s working as well as it should. Regular pest control, roofing inspections, and plumbing checks will also ensure your property is safe from wear and tear and not likely to incur an expensive repair anytime soon. |
Conduct Routine Property Inspections
Putting eyes on your property is an important part of the way we protect it. Completing inspections before a resident moves in, after a resident moves out, and at least once during the lease term allows us to provide you with the peace of mind that your residents are treating it well and there are no instances of deferred or unreported maintenance dragging down its condition and value. |
We’re here to discuss your insurance concerns and to make sure that your investment property in King County is as protected as it can be. We’re your Gladiators.
Please contact us at Real Estate Gladiators. We serve Monroe, Issaquah, Bellevue, Everett, Lake Stevens, Kirkland, and other cities in and around King and Snohomish counties in Washington State.
