Insuring Multi-Family Dwellings

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Insuring Multi-Family Dwellings

Last summer we read with interest a new report by the Pew Research Center. After reviewing Census Bureau housing data, it was determined that currently more U.S. households are headed by renters than at any time-period since 1965. The reasons for this are many and perhaps you have noticed in your own state that the number of multi-family dwellings has increased in the last decade. This is a good indicator that investors are discovering that owning one or more apartment buildings can be financially and personally rewarding; however, it does not come without risk. Insuring multi-family dwellings is a vital business expense that requires the owners or prospective buyer’s due diligence.

Defining a multi-family dwelling

Simply stated, multi-family properties can range in size from a duplex to an apartment complex with hundreds of units and multiple buildings. It is important to remember that most lenders will treat smaller multifamily units as a residential purchase, while any property with five or more units will be considered commercial real estate. For today’s discussion, we will deal with insuring investment apartment building properties.

According to Fit Small Business’ “How To Buy An Apartment Building – The Ultimate Guide,” the caliber of apartment buildings in the United States is determined by a rating scale:

  • Class “A” – are newer luxury rentals generally 10 years old or less or substantially renovated if older. The will typically take the form of garden, mid-rise, or high-rise buildings. Class “A” apartment complexes have amenities such as pools, tennis courts, and clubhouses.
  • Class “B” – can be up to 20 years old, and may be dated but are well-constructed and maintained. These complexes may or may not have amenities, but if they do, the facilities are more dated than those found in Class “A” apartment properties.
  • Class “C” – can be up to 3 decades old, with limited or no amenities. The properties may have an apparent need for renovation and repair.
  • Class “D” – will typically be over 30 years old and usually in lower socioeconomic areas, often with subsidized housing. Amenities are not typically present, and buildings will usually have an apparent need for renovation and repair.

When considering which apartment class in which to invest, the potential buyer needs to consider all the benefits and downsides. Keep in mind, your potential partners, commercial lender(s), and commercial insurance agent will appraise the value and cost involved to have a successful and appropriately protected business venture.

Insurance coverage options for your investment property

Designing an insurance package for a client’s investment property is what we do here at the John Bailey Company. We bring to the table: seven decades of industry experience; family values, integrity and honesty; industry-leading solutions that meet budget and coverage requirements; superior protection for assets (commercial and personal); and, annual policy reviews to determine updated needs.

Of course, basic coverage options would include commercial property coverage, loss of income coverage, general liability insurance (or landlord insurance). And you will want to meet with your agent to discuss the efficacy of purchasing additional options, such as: equipment breakdown/boiler and machinery coverage, commercial umbrella insurance, professional liability coverage, workers’ compensation insurance, or commercial auto insurance.

Multi-family dwellings in the news…

Did you ever set up an internet news alert about a particular subject? Some people like to stay current by monitoring the web for relevant news content. News consumers can subscribe to certain on-line newspapers or magazines, and they can set an alert via Google or Yahoo. This is an easy way to stay abreast of current events that could influence business trends, impact your business investment or offer important information to consider when reviewing insuring multi-family dwelling investment properties. For example, here are links to some recent articles of interest:

  1. “Ill-planned N. California fire recovery could sicken ‘good’ economy; expert,” North Bay Business Journal, February 26, 2018
  2. “Apartment Stairway Fall Leads to $1.4 Million Settlement in Union,” New Jersey Law Journal, February 19, 2018
  3. “Residents turn out to oppose apartments,” Richmond Times-Dispatch, February 13, 2018
  4. “Half Moon Bay considers restrictions on smoking,” The Daily Journal, February 9, 2018
  5. “Florida Apartment Building Gutted by Massive Fire,” Insurance Journal, January 10, 2018

Reach out to your agent…

John Bailey Company represents some of the industry’s best insurance companies, we have access to hundreds of policies that are customized to meet your business requirements. Policy pricing is competitive, and our licensed team members is here to educate you about your insurance needs for your multi-family dwelling investment.


Author: Brandon

Farragut High Grad, Ole Miss Rebel, Certified Insurance Counselor – CIC, Specialty Insurance Lover, Past Outdoor Insurance Underwriter, Co-Founder successes – Young Professionals of Knoxville,, 2011 Dogwood Arts Festival Co-Chair. Lucky husband and dad to 3 sweet girls.

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