Re-Insurance: The Hidden Layer of Property Insurance Costs You Don't See

As real estate investors know, insurance is one of the biggest expense line items for the property.

Reinsurance is insurance that insurance companies get to mitigate their risk exposure.

Essentially the property insurance company insures against certain casualties that may occur. If the casualty occurs, like a fire, the owner will not have to pay the huge lump sum to fix the fire damage. Then the insurance company will get reinsured against the risk of a fire occurring.

Who pays for the reinsurance? The owner in their increased bill. Who wins? From a profit standpoint, the insurance companies stack multiple layers of fees.

They essentially take your risk, pay someone to kick the risk obligation to the next person for a price (Reinsurance Treaty), and then as the middleman, take a layer of profit.