If you’ve invested in or operate an apartment complex and you’ve been turned down for insurance, your apartment buildings may be considered “high-risk.” High-risk apartment complexes can be a little trickier to insure than “normal” ones. Many people don’t even know that their apartment investment is high-risk until they search for coverage. Plus, getting an answer from insurance companies as to why your apartment complex is high-risk can be like pulling teeth. Here’s some insight on why major insurance carriers may consider your apartment complex “high-risk.”
What is a High-Risk Apartment Building?
First off, when insurance companies consider insuring a new client, they assess the risk that client presents. If a client or entity falls under a certain category, that carrier can then refuse to cover that entity. Many people can be scared away from running certain properties because of this. However, operating a high-risk multi-family unit just means that you’ll have to put a little more time and effort into proving that insuring your property isn’t as risky as originally thought. However, you’ll need to have a starting point to build from, which means learning what makes your apartment complex high risk. These are some of the things that insurance companies will consider riskier to insure:
This is one of the big factors that can make insurance companies deny coverage to your apartment complex. In the eyes of the insurance company, multi-unit buildings in an area with a high crime rate will more than likely file more claims for things like vandalism, theft, and damage to the building. You may be able to search the crime rate of your area using certain websites, but insurance companies may use their own internal versions of crime rate maps to determine whether or not to insure the building.
This is another common factor that insurance companies consider high-risk. Usually, if your apartment buildings are within a 3-mile radius of the ocean, you could be denied coverage because of the increased risk of hurricanes and flooding. Of course, your complex’s distance from the ocean and its associated risk can vary by carrier, which is why it’s important to shop around.
Fortunately, our insurance experts make shopping for the right plan super easy. We’ll find multiple quotes on only the plans and pricing you need. Call us today or fill out our online quote form to start comparing insurance plans with an expert, so you know that you’re getting the best coverage for your high-risk apartment building.
Buildings located on a floodplain
If your multi-unit property is located on a floodplain (usually next to a large stream or river), it’s obviously going to be exposed to more of a risk of flood damage. Flood insurance isn’t usually included in most insurance policies. However, your carrier may not even consider your multi-family buildings eligible for coverage because of the circumstances that could cause flooding (i.e. heavy rains).
Flood plain risks and coastal exposure risks can usually make finding insurance for rental properties in the Southeast, Florida, and Louisiana really difficult.
Get an insurance quote for your high-risk apartment building.
History of large claims
Maybe you’ve had a few natural disasters hit your apartment buildings or you’ve had a few fires. This may have led to some large liability, property damage, and business income insurance claims. In any case, your insurance company may have dropped you from your policy, and now you’re having a tough time qualifying for coverage anywhere else.
This is because, even if your properties are under new management or your rough patch is over, insurance companies don’t want to take the chance of having to cover more big claims for your residential buildings. Unfortunately, these are sometimes cases where the complex needs coverage the most, but a past of large claims is one of the other big factors that insurance companies consider when deciding whether to insure a multi-family building or not.
Low occupancy rate
If your apartment complex isn’t occupied by a certain amount of people at any given time, your business may be dropped from your insurance or denied coverage. What is considered a “low occupancy rate” varies from carrier to carrier. However, if you’re not collecting what they consider to be a sufficient amount of rent, apartment insurance carriers will wonder how you’ll be able to consistently pay for your premiums.
Type of construction
Things like wooden frame construction can pose a much higher risk of wider spread fire damage. It may have been tempting to build apartments with wooden framing a few years ago, and it may be tempting to use wood now since the building cost is lower than concrete. However, insurance companies are especially worried about the higher risk of fire due to the combustibility of wood. Plus, most buildings built before a certain time period don’t have proper sprinkler systems installed that would help contain a potential fire. So, your building’s construction might make it a high-risk apartment.
Ratio of premium to claim payout
You may have had an excellent insurance company or policy in the past. They offered you extremely low premiums and a broad amount of coverage. However, if you happened to use the full extent of that coverage, and you weren’t paying a significant monthly amount, insurance companies could take that as a sign that you’re not earning the coverage that you need (for lack of a better phrase).
Properties in Earthquake-prone areas
This is more for people on the West coast. Like multi-family complexes in the Southeast, it can be difficult for apartment complexes on the West coast (especially California) to find proper multi-unit insurance with major carriers. Insurance companies can be especially wary about the increased risk of large claims.
How Can I Get Insurance for My High-Risk Apartment Building?
When you’re operating a high-risk apartment complex, it’s extremely important to look at the long-term goals for your buildings as well as short-term issues to resolve. It may be difficult to get insurance with a more well-known carrier now, but over time, there are opportunities to build your multi-unit complex’s reputation as a less risky property to insure.
Things like updated sprinkler, electrical, and plumbing systems, weather precautionary measures, and lessening the amount of your insurance claims are all ways to help your multi-family buildings lose their high-risk status.
For the short term, however, you’ll more than likely have to work with a non-standard carrier to get the proper Excess and Surplus (E&S) insurance. Navigating these types of coverage and finding the exact plan you need can be overwhelming and time-consuming. There are tons of ways to customize coverage for each high-risk apartment situation.
That’s why our insurance experts are here to make the insurance process easy. We’ll get to know the risks of your unique multi-family buildings and give you quotes only on the types of coverage that fit you. We can help you get quotes for property insurance, general liability insurance, and more. Call us now or fill out our online form to see how easy a normally difficult insurance process can be.