An owner budgeted $90,000 to insure a 180-unit apartment building with a $44 million total insured value. The account bound at $27,000 for property and liability combined — seventy percent below budget, in a period when the trade press was full of doom about multifamily insurance costs. The anecdote is cheerful, but its real value is analytical: it demonstrates how wide the dispersion of prices can be for the same class of risk, and what actually determines where a given account lands.
Multifamily property pricing is built from a short list of variables, and a handful of them do most of the work. Age and condition of construction dominate: new construction carries modern code compliance, updated electrical and plumbing systems, and fire protection that older stock cannot match, and the pricing gap between a 2020s building and a 1970s building is routinely a multiple, not a percentage. Protection class — the quality and proximity of fire response — sets a floor. Loss history personalizes the account. And management quality, though it resists quantification, appears in every underwriting conversation, because experienced operators file fewer claims and maintain buildings that underwrite better.
The doom narrative deserves a word. Multifamily insurance costs did rise sharply in the years after 2022, driven by reinsurance costs, catastrophe losses, and litigation trends in liability. But averages conceal variance, and the variance is where buyers live. A new, well-protected, professionally managed building in a low-catastrophe geography is a different risk than the class average that drives the headlines, and carriers with appetite price it accordingly. The buyer who reads the headline number and budgets to it has, in effect, agreed to subsidize the difference.
There is also a budget discipline point embedded in the story. The $90,000 figure presumably came from a rule of thumb, a prior deal, or a lender’s pro forma — all reasonable sources, all prone to staleness in a moving market. Insurance is one of the few major cost lines in a real estate pro forma that is genuinely contestable, and the contest happens before closing, when the financing and the purchase price are still adjustable. The account that binds at $27,000 against a $90,000 budget has not merely saved premium; it has improved the deal’s economics in a way that compounds through the capitalization rate.
Price dispersion is not market failure. It is the market’s way of saying that “multifamily” is not one risk but thousands, and that the work of distinguishing them — construction detail by construction detail — is where the savings live.
This article is adapted from Samuel’s original LinkedIn post, “Our client budgeted 90k for insurance”, published January 9, 2023. Read the original post on LinkedIn →