The New Hidden Killer of Apartment Deals in 2025 and Beyond

Why Hazard Insurance Is Shredding Multifamily Underwriting, and What to Do About It

Insurance premiums used to be a line item. In 2025, they’ve become a landmine.

Over the past year, I’ve seen policies jump by 300% to 500%, even on clean deals with no claims and no red flags. The result? Acquisitions are collapsing. Refinances are getting gutted. And lenders are tightening up across the board.

Two deals. Two clients. Two weeks apart:

• One was finalizing a 50-unit purchase. The lender's replacement policy came back 4x higher than expected, DSCR dropped below 1.00. Deal dead.
  
  
• The other was midway through a cash-out refinance. The new insurance premium erased 60% of their expected loan proceeds.

Not because they made a mistake. Not because the properties were flawed. Just because the insurance market shifted, and nobody modeled the risk.

Why This Is Happening

Hazard insurance isn’t stable anymore. It’s volatile.

Carrier exits, climate risk, and underwriting model changes have made pricing unpredictable, even in markets like the Midwest and Sunbelt suburbs. If you're still copying last year's policy into your pro forma, you're not underwritten. You're exposed.

What to Do About It (Buying or Refinancing)

This isn’t something you can solve with a spreadsheet tweak. But it’s 100% manageable, if you treat insurance like a strategic variable, not a static cost.

1. Model multiple insurance scenarios 

Just like interest rates and exit cap rates. Best-case, mid-case, worst-case. If the deal doesn’t pencil at the top end, don’t move forward.

2. Don’t rely on the seller’s policy

You won’t qualify for their rate. Their policy could be legacy-priced, master-pooled, or flat-out outdated. Always quote your own structure.

3. Get a quote before you lock in

Bring in a multifamily-focused broker during underwriting. And if you're refinancing, have them model forward-looking pricing, not just today’s number.

4. Build real relationships with insurance pros

Skip the generalists. You need a broker who speaks lender language and knows how to structure coverage for multifamily assets.

How This Benefits You

This approach doesn’t just protect your downside, it makes you more credible.

Lenders will take you more seriously. Equity partners will trust your process. And you’ll underwrite more defensively in a market that demands it.

This isn’t about fear. It’s about professionalism. And it’s quickly becoming the new standard.

💬 What Do You Think?

If you could ask one question to a multifamily insurance broker this year, what would it be?

Want to get sharper at underwriting in 2025’s high-risk environment? Learn how the pros structure, sensitize, and close stronger deals, at Real Estate Finance Academy.

Trevor Calton is the founder of Real Estate Finance Academy and Evergreen Capital Advisors. A longtime CRE industry veteran since 1997, he has analyzed, acquired, or sold more than $5 billion of commercial real estate assets, financed over 500 commercial investment properties, and overseen the asset management of over 6000 units of multifamily housing. He has been coaching and teaching real estate courses to investors and professionals since 2005, helping people at all levels develop a successful real estate career or investment strategy.