MULTIFAMILY INSURANCE COSTS ARE THROUGH THE ROOF Landlords and investors across the country are encountering extreme increases in insurance premiums. Renewal premiums are increasing anywhere from 20% (at the low end) to 200%+ of the previous year’s premiums, which is putting landlords in a precarious situation when looking at how to afford such astronomical increases. Various factors are causing the steep increase in insurance premiums in the multifamily industry, and according to insurance companies, those increases aren’t likely to go away this year – or next. WHY ARE INSURANCE PREMIUMS GOING UP SO MUCH FOR LANDLORDS? Climate Change
premiums, which are in turn due to inflation, labor costs, supply chain issues, and increased timeframe of construction. Insurance Providers Exiting the Market Due to an historically high claims payout history for the multifamily industry, some insurance carriers, who had previously specialized in multifamily, have also pulled out of the industry all together, causing less competition in the market. Most of the standard carriers remaining have put a cap on the age of the building they deem as allowable risks, which has put properties older than 30 years at a severe disadvantage when approaching the standard market.
The primary reason for heightened rates is tied to the increase of both the severity and the frequency of catastrophic weather-related events. The Gulf Coast states all the way up the Atlantic have faced a large increase in claims and payouts due to hurricanes. The West Coast has been inundated with large wildfire claims, since the wildfire season is no longer being contained to the hotter months, but instead are occurring year-round. Increase in Tenant Lawsuits Higher claims due to tenant-caused damage and liability lawsuits are also directly impacting the industry’s premium trends, especially for properties that don’t require or track their tenants’ renter’s insurance. That gap leaves the landlord’s policy to be primary on a claim they may not be responsible for. Inflation Properties are also facing higher replacement costs, which are directly tied to insurance
PROPERTIES OLDER THAN 30 YEARS ARE AT A SEVERE DISADVANTAGE
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