Multifamily Insurance Costs: Why the Seller's Premium Won't Be Yours
Property insurance has been the fastest-growing expense in multifamily, and the premium on a seller's T12 is one of the least reliable numbers you will inherit. Yardi Matrix found insurance costs up 27.7 percent in the year ending January 2024, to an average of $636 per unit, after a 129 percent increase since 2018, and the seller's policy reflects decisions, claims and market conditions that may not apply to you. A Federal Reserve analysis published in September 2025 found that the average apartment property's insurance cost rose more than 75 percent after inflation between 2019 and 2024, to about $68 per unit per month in 2023 dollars, and reached roughly 5 percent of revenue.
The premium resets with the new owner, because insurers price a policy on the insured's own track record, the coverage limits and deductibles, and the market at the moment of purchase. A long-time owner with a clean history and an old policy can be paying far less than a new buyer will be quoted for the same building.
Lenders set minimum coverage requirements that the seller may never have carried, including replacement cost coverage, liability limits, loss of rents coverage and deductibles within set ceilings. Properties in a federally designated flood zone also need flood insurance on loans from federally regulated lenders, and a seller who carried only what an old loan required, or owned the building free and clear, may be underinsured by your lender's standards.
Replacement cost is often higher than buyers expect, since it is based on what it would cost to rebuild at current construction prices rather than on the purchase price. An older building bought at $90,000 a unit can carry a replacement cost well above that figure, and the premium follows the replacement cost rather than what you paid.
Location drives the largest swings, and in Florida, Yardi Matrix's data showed insurance driving much of the expense growth in its markets, with wind exposure and named storm deductibles shaping both the premium and the share of each loss an owner keeps.
The building's claims history travels with it to the next owner, even though the seller's policy does not. Water damage, roof claims and liability claims show up in loss runs that new insurers review, and a pattern of claims can raise your premium or narrow the list of carriers willing to quote the property at all.
Deductibles shift risk without removing it, since raising the deductible lowers the premium but raises what you pay after a loss. Lenders cap how high deductibles can go, so the cheapest quote you receive is not always one your lender will accept.
Building systems and condition affect pricing as well, because insurers ask about the age of the roof, the electrical panels, the plumbing and any history of fire or water problems. An older property with original systems may be quoted higher, offered narrower coverage or required to complete repairs before a policy is bound.
Liability coverage has grown more expensive as well, especially in markets with large jury awards, and lenders and investors increasingly expect higher liability and umbrella limits than a small owner may have carried, which adds premium on top of the property coverage.
Before you finalize an offer, get a quote in your name that meets your lender's coverage requirements, and ask the seller for five years of loss runs and the current policy's declarations page. If the gap between your quote and the seller's premium is large, account for it in your price instead of hoping it narrows at renewal.
Pricing the gap correctly also means carrying the higher premium through the hold, because insurance that has risen this fast can keep rising at renewal and squeeze the cash flow your investors were promised. I help apartment buyers build CRE models around their own insurance quote, test what further increases would do to returns and coverage, and review the deal against the seller's figures. If you are about to make an offer, send the seller's statements and your quote to amer@awadcapitaladvisors.com, and I can help you see what the deal looks like on your numbers.