Insurance Premiums for Apartments

[Stephen Patel]

Hey BP Members - I've been analyzing a lot of apartment and multi-family deals and I have started to notice that the biggest disconnect I have with my numbers vs. what is shared with me from current owners is their insurance on the properties. They are spending $1500-2000 a year, while my quotes are around $6000-8000 a year. I have a great track record and credit history, so that's not hurting me. I have mine as replacement cost value instead of actual cash value, which I know can save me some money, but there's still a big disconnect. Besides the property insurance, there was also a $150/unit per year charge for liability. Any good tips or ways to structure insurance so you get good protection but it doesn't kill cash flow? Thanks in advance for the help!

[Jason Bott]

@Stephen Patel based on your comments above, there are a lot of factors that could be affecting you.

*The sellers policy could have lower building values, liability coverage and a lower rate. 

*Seller could be padding the #'s to make the property look better.  Ask for a copy of the current policy.

*There are 2,200 insurance carriers in the US.  It's possible your current agent is not contracted with companies who want to insure rentals.

*If your agent is asking you for your personal info, than you are working with a personal lines agent, who will most likely not be familiar with the commercial insurance market.

*Actual Cash Value (ACV), not Replacement Cost (RC), is the lesser of the 2 coverage's.  So if you are quoting RC, and the seller has ACV, than you will have a higher premium.

*Unless it's a Single Family Rental(SFR), $150 per unit for $1M of Liability is high. Even a SFR should be $100-$125. In the Midwest, the per unit cost range for multifamily is $25-$75 depending on the crime in the area