Do You Have a Formula for Estimating Insurance Costs on Multifamily?

Question

I know this varies a lot, but is there a somewhat standard formula to factor certain size properties...6 units typically run X, 8 units typically run Y....etc.?

Jason Bott · Answer

@Brandon Sturgill any commercial insurance policy will have a property rate, premium per $100 of building value and Liability rate, cost per unit/door. Commercial Property (4 units or greater) rates in the Midwest are running around $0.20 to $0.50 depending on age, building type and occupancy. Liability rates are $20-$100 per door.

Using the rates on your current policies, you can back into the estimated annual premiums. So for example, if you fin dour current property rate is $0.30 per $100 and your per door liability rate is $50, you can estimate as follows,

* $200,000 4 family would be $600 for property and $200 for liability, annual total of $800.

* $200,000 10 family, property is $600 per year and liability is $500 for an annual total of $1100.

The total annual premium will probably vary 5-10%, but will give you a good ballpark.

Lastly, this process works best if you are buying like and kind properties. If you are buying a single family that is 10 years old and then a 5 unit that is 110 years old, just call your broker and get them quoted out.

Kylan Wilson · Answer

@Joe Fairless Is your rate $175 per unit per month?

Ben Leybovich · Answer

Brandon - in Ohio, Indiana, Michigan you're looking at about $200 - $250/door in most cases. I've seen it at $150 in AZ and $450 in TX - be careful and price it out.

Garrett Maloney, CIC · Answer

The most accurate way to forecast premiums is to find estimated property, GL, and excess rates. If you know the ballpark rates for a given region or property type, you will be able to more accurately estimate premium. Ask your agent for the rates and plug them into the formulas below.

Property Premium = "Total Insurable Value (TIV)" divided by 100 x "PROPERTY RATE"

GL Premium = "# of doors" x "GL RATE"

Excess Premium = "# of doors" x "EXCESS RATE"

Property Premium = "Total Insurable Value (TIV)" divided by 100 x "PROPERTY RATE"

GL Premium = "# of doors" x "GL RATE"

Excess Premium = "# of doors" x "EXCESS RATE"

Joe Fairless · Answer

@brandon

@Brandon Sturgill as you mentioned, it varies a lot depending on multiple factors a couple of them being the deductible and what's included in the insurance. That said, I've got a large apt community in Cincinnati that is about $175 per unit.

Brandon Sturgill · Answer

Thanks @Jason Bott

Brandon Sturgill · Answer

Makes sense. Thanks @Joel Owens

Joel Owens · Answer

Insurance companies group policies sometimes based on the quality of the asset pool.

So I have been told before for ultra premium rates a building no less than 20 years old, all brick, and in an affluent area etc.

The policy writer wouldn't put an older building in an okay area in the pool because it would affect everyone else's rates.

So it all depends on the property.

Brandon Sturgill · Answer

Thanks for the input @Joe Fairless

Do You Have a Formula for Estimating Insurance Costs on Multifamily?

Do You Have a Formula for Estimating Insurance Costs on Multifamily?

Most Popular Reply

9 Replies