How to project future cost of insurance?

Question

Risk assessment question. Currently running numbers on a multi-family.

Is it important to try and project insurance cost in the next 5-10 years and factor in potential climate risks in the area? I have insurance quotes now but I'm worried this area has a history of spiking premiums and increasing flooding concerns in 5-10 years.

Worried the quotes may look drastically different in the future and affect cash flow.

Anyone have a good resource for finding this info?

Bill B. · Answer

Ask the current owner what their rates were 3-5 years ago and what they are now?

I assume if everybody’s insurance in the area increases significantly everybody will increase their rent, same as if property taxes increased. Plus it will make home ownership more expensive and give you more renters. In most markets the local politicians are a much bigger threat to your investment than climate change.

I would add that you should do 10x more research on your city and state local governments than you put in to insurance and climate change. They WILL affect your investment much more than anything else on the planet.

Jason Bott · Answer

Regan, trying to predict insurance pricing is the same as trying to predict interest rates.  You may be able to guess the general direction over a large time period, but if you are asking what they are going to be in 36-38 months, everyone is guessing after that.

Conservatively insurance rates for Property coverage will be flat to slightly elevated the next 3-5 years.  That all goes out the window if we have a greater # of natural disasters that hit densely populated areas where a lot of damage can happen in a short period of time.