Why Rising Insurance Costs Should Be on Your Radar – And How We Can Help

For over 30 years, Cervelli Management has been a trusted partner in overseeing properties throughout New Jersey and New York.?With decades of experience, we’ve gathered valuable insights and data, especially in monitoring expenses. One trend we’ve observed is the consistent rise in insurance costs, especially during economic downturns when risks are perceived to be higher.

Here are some key factors driving these increases:

1. Increasing Natural Disasters:?The Northeast is experiencing more frequent and severe weather events, such as heavy rain and flooding. These risks now extend beyond traditional flood zones, largely due to rising water tables and the lack of municipal infrastructure investments. As natural disasters become more common and unpredictable, insurance companies face higher risks and increased claims.?To manage the increased financial risk and potential losses,?insurance companies?raise rates to ensure they have sufficient funds to cover the higher volume and cost of claims.
2. The Rise of Frivolous Lawsuits:?During economic downturns, people facing financial difficulties may be more inclined to file lawsuits in pursuit of monetary compensation or relief. Additionally, higher crime rates often associated with economic downturns, lead to increased insurance claims. To manage the elevated risk and safeguard their financial stability, insurance companies raise premiums.
3. Fewer Insurance Providers: As claims grow, some insurance companies may choose to exit the market, reducing competition. This leaves fewer options for property owners, giving the remaining insurers more control to raise prices.
4. Aging Infrastructures:?Many buildings in the Northeast were constructed before World War II. While the quality and durability of these buildings are often admired, they present significant challenges. The outdated plumbing and electrical systems often require expensive upgrades, and older infrastructures are more susceptible to issues like leaks and fires. This increased risk of damage and costly repairs contributes to higher insurance premiums.?

How Cervelli Management Can Help

Rising costs in areas like insurance, taxes, and utilities emphasize the importance of disciplined property management. At Cervelli Management, we have the systems and expertise to help multifamily property owners navigate these challenges, minimize risks, and maximize after-tax cash flow.

Contact us today to discover how we can make a difference!