NYC’s Insurance Crisis Hits High-Rise Living: Why Your Condo or Co-op Premiums Are Skyrocketing

New York City’s homeowners insurance market is experiencing an unprecedented crisis that’s particularly devastating for high-rise residents. For apartment buildings with at least 50 units, average insurance premiums more than doubled in Brooklyn and rose by over 50% in Manhattan and Queens between 2020 and 2023. This dramatic surge has left countless condo and co-op owners scrambling to understand coverage gaps while facing financial strain that’s forcing some to consider leaving the city entirely.

The Perfect Storm: Why NYC High-Rise Insurance Costs Are Exploding

The current insurance crisis stems from multiple converging factors that have created a perfect storm for high-rise property owners. Climate change is bringing more frequent and intense storms each year, leading to coastal flooding from storm surge, inland flooding from heavy rain and other types of damage. The frequency and severity of catastrophic events, such as hurricanes, wildfires, and floods, have increased, leading to higher claims costs for insurers.

The cost of rebuilding a home in 2024 is more expensive than it was just a couple of years ago. Home insurance has increased by an average of 21% across the U.S. since just last year. For NYC residents, these national trends are compounded by local factors including the state’s scaffold law and high construction costs.

Real-World Impact: When Insurance Becomes Unaffordable

The human cost of this crisis is staggering. Logan Browne thought he already experienced sticker shock from his Bushwick condo building’s insurance rate tripling last year. Then, this summer, the insurance company dropped the building, citing a “loss ratio” that Browne, the condo board president, said related to water damage claims in 2020 and 2023 after heavy rainfall flooded the basement. Nearly all declined to offer quotes, while one offered a policy for over $15,000 a year, which is what the building opted for. As a result of insurance costs alone, each apartment’s common charges nearly doubled this year.

This scenario is becoming increasingly common across the city. Owners of multifamily apartment buildings, co-ops and condos in New York City are seeing their insurance rates jump from 10% to 300%, depending on their history of claims. Nearly 500,000 New York homeowners are uninsured, many simply priced out of coverage entirely.

Understanding Coverage Gaps in High-Rise Living

High-rise residents face unique insurance challenges that create dangerous coverage gaps. For condos or co-ops, insurance responsibilities typically fall to both the building association and individual residents. While master policies cover the building exterior and common areas, owners of condos or co-ops are expected to purchase their own policies, typically an HO-6 (condo) policy, to fill remaining gaps.

These gaps can be costly. It is necessary to acknowledge the coverage of the condo association to avoid coverage gaps. Many residents don’t fully understand what their building’s master policy covers versus what they need to insure individually, leading to expensive surprises when claims arise.

Critical coverage areas include:

• “Walls-in” coverage: Covers everything inside the four walls of the unit like fixtures, flooring, cabinetry, custom upgrades, and appliances
• Loss assessment coverage: If a significant loss exceeds master policy limits, the association might levy a special assessment on unit owners. This feature can offset the owner’s assessed portion
• Flood Insurance: Standard homeowners insurance policies do not cover flood damage. Given NYC’s susceptibility to flooding, especially in certain areas, consider purchasing separate flood insurance through the National Flood Insurance Program (NFIP) or a private insurer

The Search for Solutions

Lawmakers said they would be seeking to understand the causes behind increases in premiums and will hold a hearing this year to hear from impacted property owners, developers and homeowners across the state. “While New York maintains a more robust regulatory environment for its insurance industry than in many other states, property owners continue to face significant premium increases, restrictions in coverage, or outright denials — through no fault of their own,” Skoufis said in a statement.

Some relief may be on the horizon. Several carriers began re-entering previously restricted states. By November, major national carriers like Safeco, Travelers, and Nationwide had reopened in multiple states, increasing the average quotes available per person by 60% from the year’s low point in March.

Expert Guidance in Uncertain Times

Navigating this complex landscape requires experienced guidance. For those seeking reliable home insurance in nyc, working with established local brokers who understand the unique challenges of high-rise living is crucial.

Max J. Pollack & Sons Insurance is a family business that has been serving the New York Metropolitan community for over 75 years. Based in Brooklyn, Max J. Pollack Insurance provides personal insurance and commercial insurance for clients throughout the NYC region. The company believes that the ongoing success is due to a combination of extensive insurance industry knowledge, coupled with something you dont see too often in todays world old-fashioned, personalized attention to customers needs.

Looking Ahead: Preparing for Continued Volatility

As we end out 2024 and cross over into the new year, I expect that the hard market will continue. It looks like insurance carriers will continue to be conservative with taking on new business, especially in high-risk areas like the coast and out east. Many clients will be forced into Excess & Surplus Lines (non-admitted) markets, which often come with lower limits, higher deductibles, and higher premiums.

For high-rise residents, proactive steps can help mitigate risks and costs:

• Upgrades like installing new wiring or plumbing, hiring a doorman or putting in a security system can help property owners get more favorable rates
• Proactive attention to risk control, maintenance, and open communication with carriers can help communities pursue more competitive rates. When an association has some open dialogue with their insurance company, and they provide clean documentation of building upgrades, safety systems that they’ve implemented, and mitigation efforts like water leak detection, they are increasingly viewed as lower risk insurers
• Regular review of coverage gaps between master policies and individual unit policies

The NYC homeowners insurance crisis shows no signs of immediate resolution, but understanding the challenges and working with experienced professionals can help high-rise residents navigate these turbulent times while protecting their most valuable assets. As the market continues to evolve, staying informed and proactive remains the best defense against coverage gaps and escalating costs.