How does building construction type affect apartment insurance costs?
Fire-resistive construction (concrete, steel) costs less to insure than wood-frame construction because it is more resistant to fire and weather damage.
Insurance companies classify buildings by construction type to assess fire and weather resistance, which directly affects premiums. The standard construction classes range from the most fire-resistive to the most combustible. The ISO Commercial Lines Manual defines six construction classes used by most property insurers: Class 1 (frame), Class 2 (joisted masonry), Class 3 (non-combustible), Class 4 (masonry non-combustible), Class 5 (modified fire-resistive), and Class 6 (fire-resistive). These classifications, along with the ISO-assigned Protection Class based on fire department capability and water supply, form the foundation of property insurance rating.
Fire-resistive construction (steel and concrete frame with concrete or masonry exterior) receives the most favorable insurance rates. These buildings are highly resistant to fire and wind damage, and a fire in one area is less likely to spread to other parts of the structure. Modified fire-resistive and non-combustible construction types (steel frame with non-combustible exterior) also receive favorable pricing.
Joisted masonry (masonry exterior walls with wood interior framing) is common in older apartment buildings. These buildings have moderate fire resistance from the masonry exterior but are vulnerable internally due to the wood framing. Frame construction (wood framing throughout) is the most combustible class and typically carries the highest property insurance rates.
For apartment owners, the construction type is a fixed characteristic that cannot be changed without major renovation. However, adding fire suppression systems (sprinklers) to a wood-frame or joisted masonry building can significantly reduce premiums, as it addresses the primary risk factor that drives higher rates for combustible construction types. NFPA 13 (Standard for the Installation of Sprinkler Systems) governs sprinkler design for commercial and multifamily buildings, and compliance with this standard is the basis for the ISO sprinkler credit applied to property insurance premiums.