Small Multifamily Insurance: Insuring a 5-15 Unit Apartment Building

Once a building has five or more units, it is usually insured as commercial property rather than on a dwelling policy. The pieces are familiar - building, income and liability - but the questions are more detailed.

Commercial property, not a dwelling policy

Dwelling (DP3) policies are built for 1-4 unit homes. A 5-15 unit apartment building is normally written on a commercial property policy, often packaged with liability.

What the policy covers

Building coverage to the replacement cost or the lender's required amount. Loss of rents or business income, so the rent keeps coming while a covered loss is repaired. General liability for injuries on the property, such as a fall in a stairway or parking lot. Tenants insure their own belongings.

What underwriters ask

Year built, square footage, construction and number of stories. The years the roof, electrical, plumbing and HVAC were last updated. How many units are occupied, whether there are sprinklers or fire alarms, and any losses in recent years. Having these ready speeds up the quote.

What the lender asks

Lender requirements look much like a DSCR loan: building coverage to their figure, loss of rents for a set number of months, liability limits, a deductible cap, and their mortgagee clause and loan number on the evidence of insurance. Some ask for named-insured details or additional insured on the liability.

Several buildings

Investors with more than one building, or a mix of small multifamily and single-family rentals, can often put them on one portfolio policy with one renewal date.

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