Seven Things Multifamily Owners Need to Know About Insurance in 2023
Did you know that insurance costs for owners, operators, and developers of rental housing have climbed by an average of 26% over the last year? In a new report, the National Multifamily Housing Council found that 61% percent of firms surveyed had been forced to increase their deductible in the last three calendar years to maintain affordability. Rising interest rates and other economic headwinds make 2023 different than other years. If you need to acquire or renew rental property insurance, there are a few things you should know.
1) The Insurance Market is More Challenging Today
The multifamily insurance market has been rapidly changing this year. Premiums have reached record levels due to higher claim payouts from climate-related events, inflation, and cost increases.
“Due to the amount of losses, many carriers have pulled out of the market,” said Arbor’s Vennisa Fuller, VP Front End Insurance Compliance, Capital Markets Insurance.
In addition, loan insurance applications are undergoing more rigorous underwriting scrutiny, policy limitations are increasing, and coverage sizes are getting squeezed. At the same time, owners, operators, and developers have increased their deductibles to maintain affordability.
2) Start Thinking About Insurance Early
In multifamily insurance, it doesn’t pay to wait. Start considering your insurance options as early as possible. Fuller recommends that multifamily borrowers begin the process of securing insurance at least 90 days in advance of loan closing or a renewal date.
“Insurance can’t be one of the last things on your list,” said Fuller. “Prepare early.”
By planning out your insurance route in advance, you will get a head start in securing best-in-class coverage tailor-made to your situation.
3) Not All Insurance is the Same
Multifamily insurance, issued for residential properties that are not single-family homes, is unique to insurance issued for other types of properties. Big-name carriers are often not best for rental housing. Instead, borrowers often benefit more from working with a lender who has experience and expertise with the nuances of multifamily insurance.
4) Cheaper Isn’t Always Better
Business property insurance costs can range from $1,000 to $3,000 for every million dollars of coverage for multifamily buildings. But insurance coverages may vary widely from property to property.
Your loan may require different levels of coverage based on factors such as location, occupancy type, and loss history. An experienced lender can provide invaluable assistance to help you make insurance choices that most benefit your unique situation.
5) Risk Management Experience Matters
Multifamily insurance is full of complexities. Your lender’s risk management department is crucial to success with securing insurance.
“We don’t just check for compliance,” said Fuller. “We analyze risk.”
Arbor’s experienced team of risk managers proactively assesses, analyzes, and quantifies risk to identify and help secure the right type of coverage for each borrower.
6) Strong Industry Relationships Make a Difference
Always a tremendous asset, your lender’s network is particularly helpful with the insurance process. A lender that has cultivated deeply rooted industry relationships gives you an inside track to expeditiously finding the right coverage for you.
7) Your Lender is Here to Guide You
Multifamily insurance has always been a complicated topic to tackle. But it has become trickier for both new and repeat borrowers today. As you apply for coverage, our team is always ready, willing, and able to answer all your questions and guide you to your goals.
Reach Out to Your Loan Originator
Arbor has been growing financial partnerships for over three decades by maintaining a strong commitment to our client services, including Front-End Insurance Compliance. Our team is committed to helping all our borrowers secure comprehensive insurance coverage because it’s in our best interest to protect your investment.
Contact your originator today to learn more or request a quote.
Interested in the multifamily real estate investment market? Contact Arbor today to learn about our array of multifamily and single-family rental financing options and view our other market research and multifamily posts in our research section.