Key takeaways
- DP-3 is the right policy for most rentals.
- Replacement cost coverage is non-negotiable.
- Loss-of-rent rider should cover 12 months.
- Umbrella policy of $1–2M for portfolio liability.
- Annual review prevents 30%+ premium surprises.
Core concepts
DP-3 vs DP-1
DP-3 is open-peril, replacement cost; DP-1 is bare-bones, actual cash value. Pay for DP-3.
Loss of rent
Covers rental income lost during covered repair period; 12 months is standard.
Liability
$300k base, $1M preferred. Umbrella stacks on top for portfolio coverage.
Flood / earthquake
Separate policies; required by lender in zones X, A, V.
Step-by-step framework
- 1Use a real-estate-focused broker, not a personal-lines agent.
- 2Review replacement cost annually against rebuild estimates.
- 3Add loss-of-rent and liability riders.
- 4Stack a $1–2M umbrella once 3+ properties owned.
- 5Bundle policies for 5–10% multi-policy discount.
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Common mistakes to avoid
- Underinsuring to lower premium.
- Skipping loss-of-rent rider.
- Personal-lines agent on commercial-style property.
- Forgetting flood policy in zone X (10% of zone X floods still occur).
Frequently asked questions
What's the average premium?
0.5–0.8% of replacement cost annually; coastal markets 1.5–3%.
Should I have separate policies or a master?
Master for 5+ properties; separate below that.
Does LLC affect insurance?
Insurer must name the LLC as the insured.
How much umbrella?
Match your net worth, minimum $1M.
Action checklist
- ☐DP-3 with replacement cost.
- ☐Loss-of-rent rider 12 months.
- ☐Liability $300k–$1M per property.
- ☐Umbrella $1M+ for portfolio.
- ☐Flood / quake where required.
- ☐Annual review with broker.
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