Trouble finding reasonable insurance in Chicago, IL

3 Replies

I don't currently own any property, but I'm pretty close to making offers on a few multi units in the city, 2-4 unit range type buildings.  I have called a few major insurance agencies (Farmers, MetLife) and so far the quotes I am getting sound fairly outrageous, at least compared to what I am seeing across the site and my expectations.

What kind of rates are Chicago investors seeing for multi family apartment buildings, and what agents/companies are you using. Is 5500-6500 per year REALLY what landlord insurance costs for properties in the area? They keep saying they can't insure the property for less than $1 Million or so in coverage, but the ARV on these properties is closer to 400-450k. Seems pretty unnecessary at that level.

Also, and this is probably a dumb question, lets say I am looking at a 3 flat, and each individual floor is around 1200 sq ft.  When they ask about the sq. ft. of the building, do I say 1200, or 3600?  I imagine the latter?

@Adam Sporinsky

The answer to your sq/ft question is 3600.  Basements are never included in the insurance rebuild cost.

Regarding the premium question, it depends on the age and construction of the building.  For buildings older than 60 years old, a masonry building @ $1M should be in the $2500-$4000 range.  If it is frame, it will be higher.  These are full Replacement Cost policies.

Hopefully this helps.

Originally posted by @Jason Bott :

@Adam Sporinsky

The answer to your sq/ft question is 3600. Basements are never included in the insurance rebuild cost.

Regarding the premium question, it depends on the age and construction of the building. For buildings older than 60 years old, a masonry building @ $1M should be in the $2500-$4000 range. If it is frame, it will be higher. These are full Replacement Cost policies.

Hopefully this helps.

Thanks @Jason Bott that is actually quite helpful. I didn't realize frame would cost more to insure than brick for instance (though I think that makes sense). One question I still have, is why does the insurance amount need to be so high? (This concept of replacement cost) On a unit with an ARV of something around 400k, why is replacement cost 1M? It seems like if the building burned down I could demo and rebuild a new building on it for less than half of that 1 million amount.

Thanks a ton for your answers already, hopefully I will have a property under contract that I need to speak with you about in the near future :)

@Adam Sporinsky I would argue ARV is a reflection of market value, not current building costs for most markets. That being said, if you can rebuild the building for $400k, then that should be the value we base the insurance quote on.

Most of my insurance carriers like to see the building insured for $100 per sq/ft.  Going forward, use this # as the estimated value the insurance company will want you to.