If you own or operate multifamily properties in the Midwest, you’ve probably felt it: insurance is taking a bigger bite out of your operating budget than ever before. At Ellsbury Commercial Group, we work closely with apartment owners and operators to navigate these challenges and understand why the Midwest experience differs from coastal or Sun Belt markets.
Understanding what’s driving insurance premiums and deductibles—and how they compare to places like Florida, Texas, and California—is essential for managing risk and protecting your investment.
Premiums Are Rising, Deductibles Even More
Recent data from the Federal Reserve Bank of Minneapolis shows dramatic jumps in insurance costs for Upper Midwest apartment owners:
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2021 → 2022: premiums +14%
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2022 → 2023: premiums +22%
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2023 → 2024: premiums +45%
By 2024, many premiums were roughly double 2021 levels, far outpacing general inflation. Insurance’s share of operating expenses has grown from ~6% in 2020 to ~14% by 2024.
Deductibles have also exploded, with wind and hail risk shifting more onto property owners. Percentage-based wind/hail deductibles (1–5% of insured value) are now common. For example, a $20M garden-style community with a 2% wind/hail deductible could face a $400,000 out-of-pocket cost before insurance coverage kicks in.
Why the Midwest Is Feeling the Squeeze
The culprit isn’t hurricanes—it’s severe convective storms (SCS): hail, straight-line winds, and tornadoes. These events have spiked insured losses over the past decade, especially in hail-heavy states like Minnesota, Illinois, and Nebraska.
How the Midwest Compares
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Sun Belt (Florida & Gulf states): Higher premiums, steep wind/named-storm deductibles, and limited carrier options.
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California: Wildfire risk has led to scarce standard coverage and costly multi-layered programs.
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Texas: Faces both hail and Gulf hurricane risk, with premium jumps often higher than the Midwest.
Midwest advantage: generally more carrier options and lower per-unit premiums, though hail deductibles are climbing.
Signs of Relief
The reinsurance market—which backs property policies—has seen capacity return in 2024–2025, stabilizing pricing and offering modest relief. Industry surveys suggest insurance costs may be plateauing after years of relentless increases.
Implications for Multifamily Operations
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NOI & Affordability: Doubling insurance costs since 2021 affects debt-service coverage ratios (DSCR) and rent-growth projections, especially in value-add deals.
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Deals & Underwriting: Buyers are re-underwriting insurance first; clarity on deductibles or a loss-control plan can make or break a deal.
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CapEx & Loss Control: Roofing age, materials, and site hardening influence rates—protective upgrades can lower risk and improve terms.
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Program Design: Wind/hail percentage deductibles are here to stay, but deductible buy-down products can help manage tail risk.
The Bottom Line
Compared with coastal wildfire or hurricane-prone markets, the Midwest still enjoys lower average premiums and more carrier options. However, hail and severe storms have reshaped deductible math and pushed premiums higher since 2021.
At Ellsbury Commercial Group, we help multifamily owners navigate these insurance challenges by providing insights, strategy, and connections to trusted carriers.
Ready to take control of your multifamily insurance strategy? Contact Ellsbury today to see how we can help you protect your investment while optimizing your operating budget.
