How To Lower Premiums & Protect NOI for Multi-Family

Insurance premiums in the multifamily industry have spiked year-over-year by 20%-40%. 

At the same time, underwriters have been restricting coverage meaning property owners are eating increasing deductibles, encountering lower limits, with more exclusions.

This multi-headed beast is wiping out NOI and quarterly budgets for small fire or water incidents.

You can’t control this industry trend. But you can combat it by managing your overall property risk.

By shifting your teams’ mindset from reactive to proactive protection, you can stabilize costs and increase property value.

High-CAPEX vs. Low-CAPEX Solutions

When insurance premiums and deductibles are increasing, it can be tempting to overhaul properties with fire resistant materials and replacing plumbing systems.

The problem is that your capital budget is already stretched so thin by shrinking NOI.

Stop Fire Incidents

To reduce fires, you need to target unattended cooking. Over the past 3 decades, cooking has been the #1 cause of fires in residential buildings. 

If you want to reduce your property risk, cooking has to be your #1 priority.

But you can’t simply rely on sprinklers. Sprinklers discharge 10-25 gallons of water per minute.

The building will retain structural integrity, but that unit and every unit below it will be unlivable for months while repairs ensue.

Don't rely on a reactive solution, like sprinklers or suppression systems. Instead invest in preventative tech.

Auto Shutoff Devices prevent 93% of all kitchen fires (not just cooking fires, any fire originating in the kitchen).

Properties that install FireAvert devices have an average ROI of 111.3%

That’s the difference between reactive suppression and true prevention.

Stop Water Incidents

Over 75% of multifamily operators cite water incidents as their #1 insurance claim.

By reducing the number of incidents you limit deductible costs. It also shows your insurance providers that your properties have a lower overall risk.

The only way to reduce water damage in your properties is to identify water at the first sign of intrusion.

By installing leak detectors, humidity sensors, and Auto Water Shutoff devices you do exactly this.

Leaks go from costing thousands to being detected instantly, repaired same-day, and dried before any damage occurs.

Overhauls and retrofitting buildings is a great way to protect your assets. And many insurance providers will offer discounts for this.

But the more impactful decision is to install preventative technology that does more. It saves you money today and allows your NOI to grow for the future.

The Cap Rate Multiplier: Turn Savings Into Equity

Fire safety and water protection aren’t just reducing liability. They engineer your properties to generate operational savings translating directly to property valuation.

There are plenty of ways to show that money saved today turns into more tomorrow.

But for multifamily asset managers, this is the most relevant.

This is how you can evaluate an assets value increase:

To put this equation into practice, look at this example:

A 100-unit property installs Auto Shutoff Devices across all units.

The owner saves $12,000/year through insurance risk credits and avoided deductible claims.

At a 6% Cap Rate, that $12,000 actually becomes an asset value increase of $200,000

Preventing a single out-of-pocket deductible of $25,000 instantly pays for the deployment of this tech across an entire complex.

How can a Property Manager prepare for an insurance renewal?

Step 1. Start Tracking Risk Management Today - If you want to get a discount, you have to be able to show improvement. Start tracking your losses today. Go through historical events and record them. 

Step 2. Engage the Risk Control Department - Insurance agents are sales agents. You may have to go above the “sales agents” and contact a risk control specialist.

Step 3. Preserve Clean Loss Runs - Preventing minor leaks and stove fires with proactive technology makes a massive difference. Both incident frequency and impact are considered when insurers determine premium/deductible prices.

By implementing these 3 steps you will reduce insurance costs and increase your NOI.

Choosing preventative methods turns passive insurance expenses into value in your portfolios.

Start saving on your premiums today. Waiting could mean your policy renews before you get a chance to earn your discount.

Speak to a FireAvert prevention expert today.

Or get a free quote instantly.