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Commercial Property Owners Hit with Rising Insurance Rates

Premium renewal rates are on the rise for commercial property insurance, affecting property owners across the nation after a tough year for landlords.

Over the past eight months umbrella rates have rapidly increased, with many policy holders seeing 100% plus increases to their premium.

Commercial umbrella insurance adds an extra layer of protection by covering costs that go beyond the basic liability coverage limits. Umbrella insurance is especially important to multifamily property owners and is billed based on the number of multifamily units within a property.

According to Garet Marr, Director of Insurance Services for Franklin Street, apartment owners have consistently paid anywhere between $10 and $20 per unit but are now facing increases up to $40 or $50 per unit, and potentially more if insurance claims have been filed.

The rising rates can’t be attributed to COVID-19, at least not yet. Price increases are often tied to insurance and liability claims which can take an extended period of time to be processed, and carriers haven’t figured out how the pandemic has affected their profit and losses.

In the Property & Casualty 2021 Market Outlook released by Alera Group Inc. they predict that buyers can expect to see “increases in coverage exclusions along with higher retentions and deductibles.” They project commercial property rates to rise an additional 13.6% in 2021 and also anticipate that renewals will be under more scrutiny as insurers require additional data.

In addition to commercial property lines, Alera projects general liability rates to rise 11.3% and assigns the highest increase to umbrella and excess coverage, which is forecast to increase an average of 16.6%, with the actual increase dependent upon the risk perception.

I expect that 2021 is going to be a unique year for insurance buyers. I’m optimistic that with thorough research and an experienced team, the commercial real estate investors I work with will be able to secure renewals and new policies with the best results in this challenging environment.

Justin Langlois, CCIM is a Commercial Real Estate Investment Advisor with Stirling Properties servicing Baton Rouge, Louisiana and surrounding markets. Please reach out to Justin to discuss your real estate investment strategies.

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