A multifamily deal can look great right up until the insurance quote comes back.
Imagine a 250-unit property.
The seller's T12 shows $250,000 of annual insurance expense, or $1,000 per unit. The acquisition model rolls the expense forward by 5% to $262,500.
Nothing looks unusual.
Then the buyer receives an actual insurance indication:
The property did not lose occupancy. Rents did not decline. Payroll did not increase. Nothing changed operationally.
One expense assumption changed, and $162,500 of projected NOI disappeared compared with the buyer's original pro forma.
At a 5.50% capitalization rate, that difference alone represents nearly $3 million of implied property value.
The seller's historical expenses are not your pro forma expenses.
Insurance may be one of the clearest examples.
But there is another side of insurance underwriting that multifamily investors often overlook.
Sometimes the quote is telling you something about the property. The roof may be too old. The plumbing may have produced repeated losses. The carrier may not like the electrical system. Security controls may be weak. The property may have unusual fire exposure. The deductible structure may be inefficient. The lender may require coverage that the proposed program does not provide. Or a physical characteristic may be reducing the number of carriers willing to quote the property.
In those situations, the better question is no longer simply:
What will insurance cost?
It becomes:
What is driving the insurance cost, which of those risks can we change, and what would it cost to change them?
That is where insurance moves from an expense assumption into the business plan.
TL;DR
The Insurance Market Has Changed Again
The concern around multifamily insurance did not come out of nowhere.
During the strained 2023 property-insurance market, Freddie Mac says insurer capacity became more difficult to obtain under multifamily lender requirements while borrowers experienced premium increases of approximately 10% to 20% year over year.
A Federal Reserve Bank of Minneapolis survey illustrates the severity of that reset in one region. Among participating multifamily owners, average premiums increased 14% from 2021 to 2022, another 22% from 2022 to 2023, and 45% from 2023 to 2024. The survey was regional and should not be treated as a national benchmark, but it demonstrates the type of expense shock operators were managing.
The market entering the second half of 2026 looks different.
Data reviewed August 7, 2026.
Source: Marsh, U.S. Insurance Market Rates, Q2 2026.
Marsh attributes the improving property market to high capacity and competition. Even in a softer property market, however, outcomes remain differentiated for loss-affected accounts and properties supported by less-comprehensive risk-management information. In casualty, stronger loss performance, transparent data, and demonstrable risk controls generally produce better outcomes.
Insurance capacity has improved, but the result on an individual multifamily property still depends heavily on the quality of the risk.
A Falling Rate Does Not Guarantee a Falling Premium
Conceptual Premium Framework
Insurance Rate × Insured Exposure, adjusted for coverage, limits, deductibles, loss history, risk characteristics, and program structure
Suppose insurance rates fall 10%. But replacement value increases, the buyer needs broader coverage, catastrophe exposure receives different treatment, the lender requires different limits, prior losses affect underwriting, or the buyer cannot replicate the seller's portfolio program.
The insurance rate moved down. The property's premium may not.
That is why I would never take Seller Insurance × National Insurance Trend and call it underwriting.
Insurance Is Not Really One Expense Line
The T12 might show:
Insurance: $327,450
But underneath that one number may sit several very different exposures.
| Coverage | What It Generally Addresses | Why the Underwriter Should Care |
|---|---|---|
| Property | Physical damage to buildings | Often a major component of program cost |
| General liability | Injury and liability claims | Litigation and claims severity matter |
| Umbrella / excess | Liability above underlying limits | Remains difficult in the current market |
| Wind / hail | Windstorm and hail losses | Geography, roof condition, limits, and deductibles matter |
| Named storm | Hurricane or named-storm losses | Important in catastrophe-exposed markets |
| Flood | Flood losses | Exposure and lender requirements can materially change cost |
| Earthquake | Seismic losses | Highly location-specific |
| Business income / rental value | Lost income after a covered loss | Protects operations and ability to carry debt during restoration |
| Equipment breakdown | Mechanical and equipment losses | Important for major building systems |
| Ordinance or law | Code-related rebuilding costs after a covered loss | Particularly relevant for older properties |
The question cannot just be how much insurance costs. It also has to be what you are buying for that amount and how much risk you are still keeping.
The Seller's Insurance Expense Is Not Your Insurance Expense
The seller paid $1,050 per unit. The buyer assumes $1,100.
That appears conservative because the number increased. But the percentage increase means very little if the seller's starting point is not transferable.
Portfolio Pricing
A large owner may insure thousands of units through a broader program. The amount allocated to one property on the T12 may bear little resemblance to what a new owner will pay on a different program.
Deductibles and Retained Risk
A seller may accept more retained risk in exchange for a lower premium. A buyer seeking a lower deductible is purchasing something different.
Loss History
Repeated water losses, fires, liability claims, hail events, or other claims may affect future pricing and carrier interest. The T12 will not tell you that. Loss runs will.
Replacement Value
The insurer is not underwriting what the seller paid for the property. It is underwriting the insured exposure.
Market value is not the same thing as insurable value.
Fannie Mae's current multifamily insurance requirements define insurable value around the amount needed to replace, repair, or reproduce the property, excluding land, and separately address business-income and rental-value protection.
Lender Requirements
Insurance and debt underwriting have to communicate. Fannie Mae issued an insurance-specific multifamily Guide update effective July 6, 2026. Freddie Mac's July 2026 review separately summarized changes published throughout 2025 that increased flexibility in areas such as deductibles, aggregate structures, multi-building limits, general-liability aggregates, and umbrella/excess limits.
Never rely on an old lender insurance checklist. Verify the current requirements for the actual financing execution.
Renewal Timing
The seller's T12 tells you what current ownership paid historically. You are underwriting what your ownership will pay going forward. Those are different questions.
Do Not Reduce Premium by Understating the Exposure
The objective is not to find the lowest possible premium. It is to transfer an appropriate amount of risk at an efficient cost.
Understating replacement value might make a quote look cheaper, but it can create a much larger problem after a loss. Some policies also contain coinsurance or agreed-value provisions that affect valuation requirements and how losses are settled.
Business-income coverage deserves the same attention. A major covered loss can create two financial problems at once:
- the cost of repairing the property; and
- the loss of rental income while units or buildings cannot operate.
So insurance diligence should ask not only what is the premium?, but also are the insured values and income protection appropriate for the exposure?
Stop Treating Dollars Per Unit as the Answer
I still use insurance per unit. It is useful.
If a property shows $650 per unit and otherwise similar acquisitions appear materially higher, that should trigger a question.
But dollars per unit is a diagnostic metric, not the final underwriting answer.
- Geography
- CAT exposure
- Construction
- Roof
- Plumbing
- Electrical
- Fire protection
- Claims history
- Crime exposure
- Building count
- Insured values
- Liability limits
- Deductibles
- Lender requirements
- Ownership structure
- Portfolio structure
I use insurance per unit to ask:
Does this expense look unusual?
Then I use property-specific insurance information to answer:
What should I actually underwrite?
Five Things I Want Before I Trust the Insurance Expense
1. Historical Expense
Start with the T12. Review annual insurance, insurance per unit, the monthly trend, percentage of operating expenses, and whether the policy reset during the trailing period. A mid-year reset can make the T12 materially understate the current annual run rate.
This is the same principle we use in our T12 underwriting framework: historical financials tell us what happened. They do not automatically define the forward operating budget.
2. Current Policy
Understand the limits, deductibles, self-insured retentions, sublimits, exclusions, property coverage, liability coverage, umbrella/excess, catastrophe coverage, and business-income protection. You need to understand what the historical premium actually purchased.
3. Loss Runs
Where reasonably available, I want several years. Look for frequency, severity, repeated causes, and unresolved problems. A low historical premium attached to poor claims experience may not survive the next renewal.
4. Statement of Values and Physical Property Information
Insurers need accurate information about what they are underwriting. Roof, plumbing, electrical, construction, building values, protection systems, and completed improvements all matter.
5. Property-Specific Broker Indication or Quote
This is eventually the number I care about most.
Not the OM. Not the seller's underwriting. Not a national benchmark. Not what another property five miles away pays.
The quote.
Or, earlier in the transaction, the strongest property-specific indication we can reasonably obtain.
Can You Actually Lower the Insurance Cost?
This is where insurance becomes much more interesting from an operator's perspective.
Most acquisition models treat insurance as a fixed expense. Maybe it grows 3%. Maybe 5%. Maybe 10%.
But what if part of the quote is being driven by a physical or operational characteristic ownership can actually change?
Then insurance becomes part of the value-add strategy.
A potentially fixable insurance risk is not automatically a profitable insurance improvement.
I still want five answers:
- What risk is affecting the quote?
- Can ownership change it?
- What will the change cost?
- Does the insurance market actually recognize the improvement?
- Is the resulting economic benefit worth the CapEx?
492 Units | Insurance Risk Flag: Wood-Burning Fireplaces
On a recent 492-unit multifamily property we evaluated, the insurance review identified the property's wood-burning fireplaces as an unfavorable risk characteristic.
That is property-specific feedback from that insurance process. It should not be interpreted as a universal rule that every wood-burning fireplace increases every multifamily premium.
But it changed our underwriting question.
- Initial Question — What will the property cost to insure with the fireplaces?
- Better Question — What would happen to the insurance program if we permanently decommissioned or removed them?
Chimneys and wood-burning fireplaces involve recognized fire-safety exposures, which is why NFPA 211 addresses their construction, installation, maintenance, and inspection.
I would want the broker to evaluate two scenarios:
Scenario A: Existing Condition
What does the insurance program look like today?
Scenario B: Post-Mitigation Condition
What would the program look like after acceptable decommissioning or removal?
Then compare:
- premium
- deductible
- exclusions
- coverage
- limits
- carrier participation
- outstanding underwriting conditions
Maybe the premium falls. Maybe it does not. Maybe the most valuable outcome is greater carrier competition, a better deductible, or removal of a restrictive condition.
Do not spend money solving an insurance problem until you understand how the insurance market values the solution.
Insurance Risk-Control Value-Add
The fireplace example is only one version of a broader idea.
Current 2026 habitational guidance from CRC emphasizes loss history, submission quality, and documentation of roof, plumbing, and electrical upgrades. It also identifies proactive mitigation following losses, such as pipe insulation and automatic water shut-off systems, as factors that can materially improve underwriting outcomes.
| Property Characteristic | Potential Operator Action | Why It May Matter | Underwriting Question |
|---|---|---|---|
| Wood-burning fireplaces | Decommission or remove | Additional fire exposure | Does mitigation improve carrier appetite, coverage, or pricing? |
| Aging roof | Repair or replace | Storm and property-loss exposure | What changes after replacement? |
| Aging plumbing | Replace higher-risk systems | Recurring water-loss potential | Does remediation remove an underwriting concern? |
| Water-loss exposure | Leak sensors / automatic shutoffs | Can reduce frequency or severity | Does the carrier recognize the mitigation? |
| Aging electrical | Replace problematic systems | Fire risk | Is the system restricting carrier participation? |
| Wind exposure | Roof strengthening / impact protection where appropriate | CAT vulnerability | Does mitigation change terms or deductible? |
| Wildfire exposure | Property hardening / defensible space where appropriate | CAT vulnerability | Does the insurer's model recognize the improvement? |
| Weak security controls | Lighting, access control, functioning gates, cameras | Liability and crime exposure | Is casualty underwriting being affected? |
| Poor loss history | Fix root cause and document remediation | Past losses influence future expectations | Can we demonstrate that the cause should not repeat? |
| High deductible | Evaluate alternate retention | More retained risk may reduce premium | Is the savings worth the added exposure? |
| Inefficient insurance structure | Restructure layers or carriers | Program architecture affects cost | Can the program be redesigned more efficiently? |
The key word throughout this table is potential. Do not put savings into the acquisition model until you have credible support for them.
Physical Risk, CapEx, and Insurance Should Be One Conversation
Water Loss Deserves More Attention
Water can be easy to underestimate because it does not carry the visual impact of a hurricane or fire. But one plumbing failure can create unit damage, drywall and flooring replacement, mold remediation, displaced residents, lost rent, business interruption, and recurring claims.
Chubb specifically identifies significant interior water-damage exposure in commercial real estate and habitational properties and highlights leak detection and automatic shut-off technology as mitigation tools.
If recurring water losses are damaging the property's claims experience, what is the total return from preventing the next loss?
The premium effect may be only one benefit. Avoided repairs, reduced resident disruption, lower lost rent, and future carrier appetite may matter too.
Your PCA and Insurance Underwriting Should Talk to Each Other
The PCA asks what CapEx the property needs. The insurance review asks what the property will cost to insure. But the same physical conditions can affect both.
If a roof was replaced, document it. If the property was repiped, document it. If problematic electrical systems were replaced, document it. If ownership completed fire, wind, or water mitigation, document it.
Your insurance underwriter may know more about the roof than the offering memorandum does.
Property-insurance analytics increasingly use aerial imagery and other independent data to estimate roof age and condition. A better risk does not help nearly as much if the insurance underwriter does not know the risk is better.
Value-Add Investors: Check Coverage Before Construction Starts
A renovation plan can change the property's insurance requirements. Fannie Mae's current multifamily guide requires builder's-risk insurance when ordinary property insurance excludes coverage during construction or significant renovation or restoration.
That means the insurance implications should flow directly into the renovation underwriting:
A renovation budget that ignores the insurance consequences of the renovation is incomplete.
Loss Runs Are Not Just Something You Request
Most acquisition checklists say: Request loss runs.
Good. But the second step is more important:
Understand the story behind them.
Suppose the property shows four large water claims. Initially, the insurer sees four water losses.
Now suppose diligence establishes that:
- every loss came from the same plumbing component;
- ownership replaced that component throughout the property;
- water-loss controls were added;
- maintenance procedures changed; and
- similar claims stopped.
The historical claims still happened. But the future-risk story may be different.
You cannot erase the loss run. But you can change what the loss run says about the property's future risk.
That is where the discussion begins to move from physical-property risk into the broader insurance program.
Property Risk Is Only Half the Story
Fixing the property is only one side of the equation. Even a good physical risk can be paired with a difficult liability profile or a poorly structured insurance program.
The current market makes casualty especially important. Marsh reported U.S. casualty rates increasing 7% in Q2 2026. Excluding workers' compensation, casualty rates increased 11%, while risk-adjusted umbrella/excess rates increased 15%. Continued pressure from claim frequency, severity, litigation, and large settlements remains part of the casualty story.
So improving the roof does not solve every insurance problem.
Operational controls may matter too:
- functioning gates and access control
- exterior lighting
- camera coverage
- prompt broken-door repair
- pool controls
- stair and railing inspection
- trip-hazard management
- contractor insurance requirements
- incident documentation
- prompt repair documentation
None of these creates a universal premium discount. The point is that property operations can influence liability risk, and liability risk can influence the insurance program.
Price Is Not Coverage
Program A looks better until you discover that it contains an exclusion or sublimit affecting an exposure you care about.
A quote review should consider material exclusions and sublimits relevant to the property, potentially including:
- assault and battery
- habitability
- abuse/molestation
- mold/fungi
- water
- flood
- wind/hail
- named storm
A cheaper policy is not cheaper if the risk you thought you transferred is actually excluded.
Actual coverage depends on policy wording and should be reviewed with qualified insurance professionals and, where appropriate, counsel.
Who Is Actually Insured?
The next step is making sure the insurance program actually protects the entities involved in the deal.
Multifamily ownership frequently involves more than one entity:
- property-owning LLC
- sponsor entities
- property manager
- affiliated management companies
- lender
- contractors and vendors
Amwins' 2026 multifamily guidance warns that additional-insured and named-insured status are not interchangeable and that policy structure should align with ownership and management agreements.
Before closing, I want the insurance team to confirm:
- Which entity is the named insured?
- Is the property-owning LLC properly scheduled?
- How is the property manager protected?
- Is ownership relying only on additional-insured status?
- Does the insurance arrangement match the management agreement?
- Are lender interests properly reflected?
- Is every intended property properly scheduled on a portfolio policy?
A perfectly priced policy is not a good insurance program if the wrong entity is insured.
Carrier Quality Matters Too
Even after we understand the coverage and insured entities, there is another question:
Who is standing behind the policy?
Lenders may impose financial-strength requirements on acceptable insurance carriers. Fannie Mae's current multifamily guide, for example, generally requires a new insurance policy's carrier to have an A.M. Best general policyholder rating of A- or better, subject to the Guide's complete requirements and permitted alternatives.
Other lenders and executions can apply different standards.
Does this insurer satisfy the current lender's financial-strength and eligibility requirements?
A cheap quote from an unacceptable carrier is not a usable quote.
Compare Insurance Quotes Like an Underwriter
Do not reduce three proposals to $395K vs. $410K vs. $425K.
| Item | Program A | Program B | Program C |
|---|---|---|---|
| All-in annual premium | |||
| Property deductible | |||
| Wind/hail deductible | |||
| Named-storm deductible | |||
| Water deductible | |||
| Property limit | |||
| Business-income / rental-value coverage | |||
| GL limits | |||
| Umbrella / excess | |||
| Major sublimits | |||
| Material exclusions | |||
| Carrier financial strength | |||
| Lender eligible? | |||
| Outstanding subjectivities | |||
| Required improvements |
Compare insurance programs, not just premiums.
Do Not Optimize Premium. Optimize Total Cost of Risk.
Once the coverage, carrier, and structure are understood, the next step is to evaluate the economics of the program as a whole.
- Program A — Premium: $400,000. Deductible: $25,000
- Program B — Premium: $330,000. Deductible: $150,000
Program B appears to save $70,000 per year, but ownership is retaining substantially more risk.
Simplified Total Cost of Risk
Insurance Premium + Expected Retained Losses Within Deductibles / SIRs + Expected Uninsured or Excluded Loss Exposure + Annualized Risk-Control Costs + Insurance Administration / Program Costs + Insurance-Related Liquidity or Escrow Costs
This is a conceptual underwriting framework, not an actuarial formula. One-time mitigation CapEx should generally be analyzed separately rather than dropped into an annual total-cost-of-risk calculation.
A higher deductible may make economic sense. But I still want to know:
- the premium savings
- expected claim frequency
- per-occurrence versus aggregate exposure
- historical losses
- available liquidity
- lender acceptance
- whether one bad year could erase several years of savings
That is an investment decision, not just an insurance decision.
Insurance Can Affect Liquidity Before It Affects NOI
The annual insurance expense in the operating statement and the amount of cash ownership must fund are related, but they are not always the same timing question.
Premium payments, deposits, lender escrows, and other insurance-related requirements can create cash needs around closing without changing stabilized NOI dollar-for-dollar.
- Operating Question — What annual insurance expense belongs in NOI?
- Capitalization Question — How much cash does the insurance structure require from ownership, and when?
Do not confuse an operating expense assumption with a funding requirement. Underwrite both.
Sometimes the Property Is Not the Problem. The Insurance Structure Is.
Larger multifamily programs can involve primary coverage, excess layers, umbrella layers, multiple carriers, quota-share structures, monoline policies, deductibles and SIRs, portfolio programs, property carve-outs, and specialty placements.
Current 2026 property-market conditions are giving brokers and owners more room to revisit program architecture. Expanded capacity has increased optionality for structural, coverage, and capacity solutions, while current habitational guidance notes that buffer and excess layers can sometimes be restructured to eliminate minimum-premium inefficiencies.
Sometimes you reduce insurance costs by fixing the property. Sometimes you do it by fixing the insurance program.
Underwrite the ROI of Insurance Mitigation
Once the insurance team identifies an actionable issue, analyze the improvement like any other value-add initiative.
Suppose credible broker or carrier feedback supports:
Simple Payback
$300,000 ÷ $75,000 = 4.0 years
Illustrative NOI-Based Value at 5.50%
$75,000 ÷ 5.50% ≈ $1.36 million
That does not mean the property is automatically worth $1.36 million more.
The investor still has to evaluate:
- initial CapEx
- durability of the savings
- future renewal uncertainty
- actual market cap rate
- operational benefits
- expected loss reduction
- coverage impact
- carrier competition
Do not model insurance savings until credible insurance-market feedback supports them.
Worked Example: How One Expense Line Changes the Deal
Return to our illustrative 250-unit acquisition.
| Item | Amount |
|---|---|
| Units | 250 |
| Seller T12 insurance | $250,000 |
| Seller insurance / unit | $1,000 |
| Buyer's initial 5% escalation | $262,500 |
| Initial modeled insurance / unit | $1,050 |
| Property-specific indication | $425,000 |
| Buyer indication / unit | $1,700 |
Difference from seller history: $175,000.
Difference from the buyer's original pro forma: $162,500.
The NOI Effect
Assume NOI before correcting the insurance assumption is $3.0 million. Replacing the seller's $250,000 expense with $425,000 produces:
Adjusted NOI
$3.00M - $175K = $2.825M
The Value Effect
- Before — $54.55M ($3.00M ÷ 5.50%)
- After — $51.36M ($2.825M ÷ 5.50%)
Implied value difference: approximately $3.18 million.
A $175,000 expense mistake is not a $175,000 underwriting mistake when NOI is capitalized into value.
The Debt Effect
Assume annual debt service of $2.10 million.
Before correcting insurance: DSCR = $3.00M ÷ $2.10M = 1.43x.
After correcting insurance: DSCR = $2.825M ÷ $2.10M ≈ 1.35x.
Now assume debt sizing at:
- 1.25x minimum DSCR
- 6.25% interest rate
- 30-year amortization
- approximately 7.39% annual mortgage constant
- Before Insurance Correction — Maximum debt service: $2.40M. Approx. supported debt: $32.5M
- After Insurance Correction — Maximum debt service: $2.26M. Approx. supported debt: $30.6M
Approximate reduction in supported debt: $1.9 million.
This is also why insurance belongs in the same conversation as the debt analysis in our Multifamily Refinance Wall article.
Stress the Insurance, Not Just the Quote
A property-specific indication is better than the T12. But today's quote is not guaranteed forever.
| Scenario | Annual Insurance | Per Unit | NOI | Implied Value @ 5.50% |
|---|---|---|---|---|
| Improved renewal | $375K | $1,500 | $2.875M | $52.27M |
| Base indication | $425K | $1,700 | $2.825M | $51.36M |
| Stress renewal | $500K | $2,000 | $2.750M | $50.00M |
The difference between the improved and stress cases is $125,000 of NOI, or approximately $2.27 million of implied value at a 5.50% cap rate.
That deserves a sensitivity, not just one number.
Insurance Due Diligence Should Start Earlier
| Acquisition Stage | Insurance Work |
|---|---|
| Initial screening | Review T12 insurance, $/unit, location, construction, and obvious CAT exposure |
| Around LOI | Obtain preliminary broker guidance where practical |
| Early diligence | Request policy, statement of values, loss runs, and property details |
| PCA / physical inspection | Identify insurer-sensitive roof, plumbing, electrical, fire, water, and security conditions |
| Insurance marketing | Obtain a current-condition indication |
| Business-plan analysis | Ask broker to evaluate major proposed risk improvements |
| Debt selection | Reconcile the program with current lender requirements |
| Final underwriting | Replace preliminary estimates with property-specific information |
| Pre-close | Confirm binder, carrier eligibility, insured entities, and subjectivities |
| Post-close | Complete required risk-control commitments |
| Renewal planning | Review losses, values, completed improvements, and marketing strategy well before renewal |
The later you discover the insurance problem, the fewer options you usually have to solve it.
MSA Insurance Underwriting Memo
Instead of leaving insurance buried inside one expense line, I would summarize it for the investment committee.
Property
Units: 492
Seller T12 Insurance: $_____
Seller Insurance / Unit: $_____
Current Buyer Indication: $_____
Buyer Insurance / Unit: $_____
Primary Quote Drivers
- Wood-burning fireplaces
- Roof age / condition
- Loss history
- Construction
- CAT exposure
- Liability exposure
- Other: _____
Proposed Risk Mitigation
- Decommission fireplaces
- Complete roof work
- Install water-loss controls
- Other: _____
Broker Feedback
Existing Condition Indication: $_____
Post-Mitigation Indication: $_____
Deductible Change: _____
Carrier Participation Change: _____
Coverage / Exclusion Change: _____
Coverage and Ownership
Property-owning entity properly insured: Yes / No
Property manager structure reviewed: Yes / No
SOV reconciled: Yes / No
Business-income coverage reviewed: Yes / No
Material exclusions reviewed: Yes / No
Carrier / Lender
Carrier financially acceptable: Yes / No
Execution: Agency / Bank / CMBS / Other
Lender compliant: Yes / No
Outstanding requirements: _____
Insurance escrow / upfront funding: $_____
Underwriting
Base Insurance Assumption: $_____
Stress Insurance: $_____
Expected Renewal Assumption: $_____
Mitigation CapEx: $_____
Supported Recurring Savings: $_____
Investment Decision
Accept current cost / Pursue mitigation / Restructure insurance / Change debt execution / Renegotiate price / Require seller remediation / Reject transaction
That is a much better decision-making output than Insurance: $1,700/unit.
Insurance Underwriting Lens
Before I consider the insurance line fully underwritten, I want to understand five things.
Historical and Current Program
What did the property actually pay? Did the premium change during the T12? When does the policy renew? Is the seller benefiting from portfolio pricing? What coverage, deductibles, retentions, exclusions, and sublimits are inside the historical expense?
Property and Loss Risk
What do the roof, plumbing, electrical systems, fire protection, construction, security, catastrophe exposures, and loss runs tell us? Are recurring losses coming from problems ownership can fix?
Ownership and Coverage
Who is actually insured? Is the property-owning entity correctly scheduled? Does the property manager's coverage structure align with the management agreement? Is business-income protection appropriate? Are insured values defensible?
Market and Financing
Do we have a property-specific indication? What is driving it? Which carriers are participating? Are the carriers financially acceptable to the lender? Does the coverage satisfy the current loan program? What escrows or cash funding does the structure require?
Business Plan and Downside
Which identified risks can ownership economically mitigate? Has the broker evaluated the property with and without those improvements? Are the savings supported? What happens if the next renewal is 10% higher? What if deductibles increase? Does the deal still meet return requirements?
If we cannot answer those questions, we may have estimated insurance. We have not fully underwritten it.
Where This Connects to the Rest of the Underwrite
Insurance should not sit in isolation.
Our foundational multifamily underwriting guide explains why seller financials have to be translated into defensible forward assumptions.
Our T12 analysis shows why taxes and insurance frequently require forward normalization rather than copying historical expenses.
And our Multifamily Refinance Wall analysis shows what happens when lower NOI flows simultaneously through valuation and debt sizing.
Insurance sits directly in the chain from revenue through returns. But unlike some expense lines, part of the insurance outcome may be connected to risks ownership can actually change.
MSA Investment View
Insurance remains one of the most important expense assumptions in multifamily underwriting. But the way investors should analyze it is changing.
During the hardest part of the insurance cycle, the dominant question was:
How much higher will insurance be?
In 2026, the better question is:
Why does this particular property cost this much to insure?
Property-market capacity has improved substantially while casualty remains difficult. So when one apartment property still receives an ugly insurance outcome, I want to understand what kind of problem we are actually dealing with.
Classify the Problem Before Deciding How to Solve It
- Unavoidable Risk A property characteristic or market exposure we cannot economically change.
- Transferable Risk A risk that can be transferred through an appropriate insurance structure at an acceptable cost.
- Fixable Risk A characteristic ownership can potentially improve through CapEx, maintenance, operational controls, or insurance-program restructuring.
Maybe the problem is the roof. Maybe it is the plumbing. Maybe it is the fireplaces. Maybe it is the claims history, crime exposure, lender, carrier, deductible, or the insurance structure itself.
The MSA Insurance Risk Framework gives us a more useful starting point than simply assuming insurance increases 5% every year.
Final Takeaway
The goal is not to find the cheapest insurance.
It is to understand what the insurance market is telling you about the property.
Some risks are unavoidable. Some can be transferred. Others can be fixed.
The underwriter's job is to know the difference and understand what each one does to NOI, value, debt, liquidity, and returns.
The best multifamily underwriters do not just estimate insurance. They identify what is driving the cost, determine which risks can be changed, and underwrite the economics of changing them.
That is the difference between entering an insurance expense and actually underwriting insurance.
Sources & Data
Data reviewed August 7, 2026.
- Marsh: U.S. Insurance Market Rates, Q2 2026
- Freddie Mac Multifamily: Updating and Aligning Multifamily Insurance Requirements, July 7, 2026
- Fannie Mae Multifamily Guide: Guide Update 26-16, Insurance
- Fannie Mae Multifamily Guide: Property and Liability Insurance
- Fannie Mae Multifamily Guide: Property Coverage, Coinsurance and Agreed Amount Requirements
- Fannie Mae Multifamily Guide: Business Income / Rental Value Coverage
- Fannie Mae Multifamily Guide: Builder's Risk Insurance
- Fannie Mae Multifamily Guide: Insurance Carrier Rating
- Fannie Mae Multifamily Guide: Insurance Escrow Requirements
- CRC Group: 2026 Property State of the Market at a Glance
- Amwins: Lenders and Compliance, How Ongoing Changes Reshape the Market, June 22, 2026
- Amwins: Coverage Essentials for Property Managers and Owners, May 26, 2026
- Chubb: Preventing Water Damage
- Moody's: A Modern Approach to Roof-Age Detection
- NFPA 211: Chimneys, Fireplaces, Vents, and Solid-Fuel-Burning Appliances
- Federal Reserve Bank of Minneapolis: Rising Property Insurance Costs Stress Multifamily Housing
Frequently Asked Questions
What is a good multifamily insurance cost per unit?
There is no universal number that should be treated as correct. Insurance per unit is useful for screening and comparison, but geography, construction, catastrophe exposure, insured values, loss history, liability risk, deductibles, coverage structure, carrier requirements, and financing can produce materially different costs between otherwise similar properties.
Use insurance per unit to identify something worth investigating, not to replace a property-specific insurance indication.
How should I underwrite multifamily insurance?
Start with historical financials, but replace the seller's expense with property-specific forward guidance as soon as practical. Review the current policy, loss runs, insured values, physical-property characteristics, deductibles, exclusions, ownership structure, lender requirements, carrier eligibility, and broker indication.
Are multifamily insurance costs still increasing in 2026?
There is no single answer. Marsh's latest U.S. commercial data shows property rates declining 13% in Q2 2026 while casualty rates increased 7%. Excluding workers' compensation, casualty rates increased 11%, and risk-adjusted umbrella/excess rates increased 15%. Individual multifamily properties can perform very differently from those averages.
Can physical improvements lower insurance costs?
Potentially. Improvements to the property's physical or operational risk profile may improve carrier appetite, terms, deductibles, coverage, or pricing. No specific savings should be assumed without property-specific broker or carrier support.
Can removing wood-burning fireplaces reduce multifamily insurance premiums?
Potentially on an individual property, but there is no universal discount. On the 492-unit property discussed here, the fireplaces were specifically flagged during the insurance review. The appropriate underwriting approach is to compare the program with and without that exposure before modeling savings.
Does replacing a roof automatically lower the premium?
No. Roof age and condition are only part of the risk. The correct question is whether the proposed replacement changes actual carrier appetite, terms, deductibles, or pricing.
What is total cost of risk?
For acquisition underwriting, it is a broader framework than premium alone. It considers premium, expected retained losses, uninsured exposures, recurring risk-control costs, program costs, and insurance-related liquidity or escrow consequences.
Is the lowest insurance quote usually the best?
No. Quotes can differ materially in deductibles, exclusions, sublimits, insured entities, carrier quality, and lender compliance.
Why does carrier quality matter?
A lender may require the insurer to satisfy minimum financial-strength standards. Carrier eligibility should therefore be confirmed against the actual loan program before a quote is treated as executable.
Do major renovations change insurance requirements?
Potentially. Significant renovation or restoration may require builder's-risk coverage when the standard property policy does not cover the construction exposure.
Does insurance affect cash-to-close?
It can. Premium funding, deposits, lender escrows, and other insurance-related requirements may create cash needs separate from the stabilized annual insurance expense modeled in NOI.
Does insurance affect multifamily loan proceeds?
Yes. Higher insurance expense reduces NOI, which can reduce DSCR and debt yield and therefore reduce the amount of debt the property supports.
When should insurance diligence begin?
Alongside financial underwriting, not immediately before closing. The earlier the buyer identifies insurance problems, the more options there may be to mitigate the risk, restructure coverage, change financing, renegotiate pricing, or walk away.