Multifamily Insurance Cost Per Unit: 2020–2026 Trends and What's Driving Them

If you budgeted multifamily insurance costs the same way in 2024 as you did in 2020, you almost certainly came up short. The cost trajectory over this period has been one of the sharpest in the industry's history, and understanding it at the per-unit level is the starting point for making intelligent decisions about how to respond.

• Average annual insurance cost per unit (2021): $502  —  national benchmark, same-store multifamily data

• Average annual insurance cost per unit (2024): $777  —  55% increase in three years — Federal Reserve data

• Insurance as % of multifamily revenue (2024): 4.78%  —  up from 1.95% in 2000

The acceleration pattern

The cost increases were not linear across the 2021–2024 period. They came in waves:

• 2021 to 2022: 11% year-over-year increase, above historical norms but within the range operators had seen before

• 2022 to 2023: 25% year-over-year increase, the inflection point where insurance became a crisis-level budget item for many operators

• 2023 to 2024: 12% year-over-year increase, a deceleration from the prior year's spike, but building on a dramatically higher base

The cumulative effect of these three years: an operator who budgeted $502 per unit in 2021 and did not adjust was spending $777 per unit by 2024, a $275 per unit shortfall that, across a 500-unit portfolio, represents $137,500 in unbudgeted annual expense.

What is driving the cost increase: the four factors

Factor 1: Catastrophic weather losses

The U.S. has averaged 20 billion-dollar weather disasters per year since 2019, compared to 13 per year in the 2010s. These events generate massive claims that carriers spread across all policyholders nationally through premium increases. An operator in Chicago with zero wind damage claims is still paying higher premiums because of hurricane losses in Florida and wildfire losses in California.

This cross-subsidization is inherent to the traditional insurance pooling model. It is one of the structural inefficiencies that captive structures address, an operator's captive premium is driven by their own loss history, not the industry's.

Factor 2: Construction cost inflation

Property insurance premiums are tied to replacement cost values, what it would cost to rebuild the property at current material and labor prices. Construction costs rose dramatically during and after the pandemic: lumber, steel, roofing materials, HVAC systems, and skilled labor all increased substantially. As replacement cost values rise, insured values rise, and premiums rise with them.

Many operators were underinsured in 2020 and 2021 because their insured values had not been updated to reflect rising construction costs. When claims hit in 2022 and 2023, the valuation gaps became apparent. And carriers responded by tightening underwriting requirements and mandating updated valuations.

Factor 3: Liability cost escalation

While property rates showed some stabilization in 2024 (the first decline since 2017) liability lines continued to rise. Nuclear verdicts (multimillion-dollar jury awards in liability cases), social inflation (the broader trend of increasing litigation costs), and litigation funding (third-party investors financing lawsuits in exchange for a share of recoveries) have all driven liability claims costs higher.

For multifamily operators, general liability and umbrella premiums have been particularly affected. Primary liability costs were projected to rise 10–20% in 2025, with umbrella rates increasing 10–15%.

Factor 4: Reinsurance market tightening

Reinsurance companies (the insurance companies that insure insurance companies) dramatically reduced their capacity after years of catastrophic losses. When reinsurers reduce capacity and raise their own rates, primary carriers pass those increases directly to policyholders. The reinsurance market tightening of 2021–2023 was one of the primary drivers of the dramatic premium increases that operators experienced.

Market-specific variations

National averages obscure significant market-level variation. Per-unit annual costs at the extremes:

• Houston, TX: costs exceeding $1,200 per unit annually, driven by severe convective storm exposure, high litigation environment, and aging housing stock

• West Palm Beach, FL: annual insurance costs over $1,800 per unit reported for some properties, driven by hurricane exposure and post-Ian market dislocation

• Los Angeles, CA: 30% year-over-year increases following the 2025 wildfires, with further increases expected

• Chicago, IL: more moderate cost growth than Sun Belt and coastal markets, but still significantly above 2020 levels

• Mountain West markets (Denver, Phoenix, Salt Lake City): above-average cost increases driven by hail exposure and rapid portfolio growth outpacing underwriter capacity

What the trend means for 2026 budgeting

The deceleration from the 2023 spike does not mean the cost trend has reversed. It means costs are rising from an already-elevated base. Operators who benchmarked their 2024 insurance spend against 2021 actuals discovered a $275 per unit gap. Operators who benchmark their 2026 budgets against 2024 actuals and assume flat costs are still likely to find increases of 5–12% on liability lines and 0–8% on property lines in most markets.

The structural response (captive participation, risk mitigation investment, and optimized traditional placement) is the only approach that addresses the cost trend rather than just tracking it.