The Landlord Playbook for Avoiding Costly Insurance Mistakes

For many first-time landlords, insurance is treated as a one-time task at closing. In reality, it’s one of the most important tools you have to protect your cash flow and long-term returns. Here are some of the most common insurance mistakes—and how to avoid them.

Underinsuring the Property

Many policies include an insurance-to-value clause, requiring you to insure to at least 80% of the replacement cost. If you don’t, your claim payout can be reduced—even on partial losses. With rising construction costs, many properties are unknowingly underinsured. A quick review can prevent a major shortfall later. The simple question is how much it would cost to rebuild. That’s the only question. Not how much you could sell it for, but how much it would cost to rebuild.

Choosing the Wrong Deductible

Low deductibles often mean higher premiums and more frequent claims. For landlords, insurance should cover major losses—not routine repairs. A higher deductible paired with solid reserves is typically a more efficient strategy. It should be at least more than the deposit, and probably double.

Skimping on Water Coverage

Standard policies often exclude sewer backups, drain backups, and sump pump failures. These require added endorsements—and skipping them can be costly. Water claims are one of the most common and expensive issues landlords face. It doesn’t cost a lot to add, ask your insurance agent.

Ignoring Major System Risks

Older roofs, plumbing, and HVAC systems increase claim risk and can lead to coverage limitations. Knowing the age and condition of these systems helps avoid denied claims and unexpected expenses. Your inspection is more than just learning about the current condition, but also about how much life is left in these systems.

Not Reviewing Your Insurance Regularly

Insurance isn’t “set it and forget it.” As property values, rents, and replacement costs change, your coverage should too. Just as important, rates and carriers change. If you’re not shopping your policy every couple of years, you could be overpaying or missing better coverage options. Best way to do this is have an independent agent like Gila Insurance Group LLC. We have a feel for the market, represent multiple carriers to find better pricing and coverage tailored to rental properties. That flexibility can make a meaningful difference in both cost and protection.

The goal isn’t just to have insurance—it’s to have the right insurance structured correctly. Done well, it protects your investment. Done poorly, it can leave you exposed when it matters most. You can learn more about the right coverage and request a quote at GilaInsurance.com/AZREIA.