What types of insurance does an apartment building owner need?

An apartment building owner's insurance program should be built around several core coverages. Commercial property insurance protects the physical building and its systems against damage from fire, storms, and other covered perils. General liability insurance covers bodily injury and property damage claims from tenants, visitors, and other third parties.

Beyond these two foundational policies, most apartment owners should carry loss of rents coverage (to replace rental income when units are uninhabitable due to a covered loss), a commercial umbrella policy (to extend liability limits above the underlying policies), and workers compensation insurance (required in most states if the owner has employees, including maintenance staff). Agency lenders impose specific insurance mandates: Fannie Mae's Multifamily Selling and Servicing Guide (Part III, Chapter 6) requires property, liability, flood (where applicable), and other coverages as conditions of DUS loans, while Freddie Mac's Multifamily Seller/Servicer Guide (Chapter 58) sets comparable requirements for its loan programs.

Depending on the property, additional coverages may be appropriate. These include flood insurance, earthquake insurance, equipment breakdown coverage, cyber liability, environmental pollution liability, and tenant discrimination liability insurance. The right combination depends on the property's location, age, size, construction type, and the owner's risk tolerance.