Annual multifamily housing property insurance costs per unit increased from $502 in 2021 to $777 in 2024, a 55% rise, the National Apartment Association reports. As owners struggle to meet revenue goals while insurance premiums rise and coverage shrinks, property managers can advise on strategies to ease the pressure insurance premiums put on net operating expenses.
John A. Jacobsen, J.D., founder and CEO of Final Analysis, addressed recent developments in property insurance and their impact on property investors and managers in a webinar hosted by the Institute of Real Estate Management. Jacobsen is a public adjuster, a licensed professional who represents policyholders’ interests in documenting and negotiating property insurance claims.
Insurers See Record Profits for Less Service
“Insurance is great until you have a claim.” Jacobsen’s firm espouses this common-held consumer sentiment. “2025 was the most profitable underwriting year for property and casualty insurance companies in more than two decades, earning $68.7 billion in underwriting income—an increase of $25.3 billion in 2024,” Jacobsen says.
“They’ve taken steps to limit their coverage and provide less service, putting pressure on owners and property managers to raise rental rates,” he adds.
After years of largely stable insurance costs, premiums across the housing sector have risen sharply in recent years with some regional variations. The West saw the largest increase, up 43% between 2018 and 2024. Elsewhere, average premiums rose 18% in the Northeast, 25% in the Midwest and 27% in the Southeast over this period, according to the National Association of Insurance Commissioners.
In many markets, increases have hit the multifamily sector harder than the single-family sector. Over five years beginning in 2019, a Federal Reserve analysis found that average multifamily per-unit property insurance costs rose more than 75% compared to 62% for single-family homeowners.
Insurance Industry Practices Unfavorable to Policyholders
The increased frequency of severe weather events, rising building costs and aging inventory, among other factors, have driven up insurance costs for multifamily properties. Strategies pursued by insurers to reduce their liability and push costs onto owners include:
Stricter underwriting standards
Insurers increasingly scrutinize the condition and management of individual buildings rather than considering broad market characteristics. Jacobsen cites insurers requiring a roof replacement on a roof less than 15 years old before providing coverage. “Insurers know they will eventually have to replace the roof, so they require policyholders to replace it now, reducing their liability at the expense of the policyholder,” he says.
“Increasingly, policies exclude water damage, except for very narrow exceptions,” says Jacobsen. “Policies require owners to pay extra for ‘water endorsements,’ and limit coverage to about $10,000 when it can easily cost up to 10 times that amount for a serious water event,” he adds, noting the risk of mold.
Limiting policy challenges to settlements
Citing Florida practices, Jacobsen notes that insurance companies use mediation and arbitration more often, with a panel of judges selected by the insurer, eliminating the option for policyholders to initiate a third-party appraisal to challenge the insurer’s settlement offer.
“These panels weigh heavily in favor of insurance companies, as much as 95% of the time,” Jacobsen says. “Further, they require the policyholder to pay any attorney fees.”
Legislation inhibiting claims
“Many states have enacted legislation making it tougher for policyholders not only to pursue claims, but to get help doing so,” he says. “We’re beginning to see insurance companies add endorsements stating that they will not cover your claim if you have a public adjuster on it, limiting policyholders’ options,” Jacobsen says.
Consider a Hybrid Approach for Insurance
To counter rising costs and policy limitations, Jacobsen recommends owners of multifamily assets consider self-insuring their property. “This is a good option if they own the property outright, but first check all the rules,” stresses Jacobsen, including guidelines related to required reserves, state regulations for handling claims and the involvement of a third party.
For those unable to carry the risk (or because their mortgage provider requires it), a hybrid approach is an alternative, where the policyholder self-insures up to a certain amount and obtains coverage for claims and legal costs above that amount. “A tangential benefit of self-insuring is that contractor prices tend to go down when the owner is paying,” Jacobsen says.
How Property Managers Can Help Owners
Jacobsen offers these tips for property managers working with owners to manage rising insurance costs:
- Require tenants to carry their own insurance and provide a copy of their declarations page at lease signing and renewal. Include lease language imposing a fine for failure to do so. Do occasional spot checks to ensure tenants’ policies are in force.
- Obtain the most comprehensive coverage available, especially for common risks such as power outages, sewer backups and fire.
- If offered a lower premium, ask about commensurate reduction in coverage. Claim representatives or public adjusters are good sources for information.
- Consult with experts to obtain the best property-specific coverage. Obtain an independent review of the property to review current building conditions and any changes to the insurance environment, such as flood map changes.
Be Proactive
In 2025, the Federal Reserve reported that landlords bore nearly three-quarters of the cost of rising insurance premiums, reducing profits. The good news is that property insurance pricing has become more competitive in many commercial markets. Yet multifamily owners enter this softer market from a much higher cost base, and high-risk properties still face significant challenges.
“The best way to counteract these challenges is to be proactive,” advises Jacobsen. “With costs beginning to show signs of coming down, shop more wisely and compare quotes from several companies,” he says, adding, “and if there are pending claims, stay in touch with your legal counsel on developments and efforts to bring them to resolution.”
He warns, however, that change comes very slowly in property insurance. “The industry’s lobby is second only to Big Pharma, so the legislative changes don’t worry insurance companies,” he says.
Looking ahead to the near term, Jacobsen says, “Look for more attempts to limit coverage and options for the insured, such as anti-public adjuster endorsements. You will see premium prices decrease, though not to what they were six years ago, and with less coverage.”
