Survey of Insurance Costs
for Mulfamily Buildings
Constructed with
Wood-frame and Concrete
Dr. Pieter VanderWerf, Pauline Chang, Mahew Collings,
Krisn Myer, and Charles Prest
Boston College | February 2024
Survey of Insurance Costs for Multifamily Buildings
Constructed with Wood-frame and Concrete
Dr. Pieter VanderWerf, Pauline Chang, Matthew Collings, Kristin Myer, and Charles Prest,
Boston College
February 2024
© Copyright 2024 by the National Ready Mixed Concrete Association
All Rights Reserved
Acknowledgment
This document was underwritten by the National Ready Mixed Concrete Association (NRMCA). Founded
in 1930, the National Ready Mixed Concrete Association is the leading industry advocate. Our mission is
to provide exceptional value for our members by responsibly representing and serving the entire ready
mixed concrete industry through leadership, promotion, education and partnering to ensure ready
mixed concrete is the building material of choice.
The National Ready Mixed Concrete Association is grateful to the Concrete Advancement Foundation for
their support of this project.
Disclaimer
This report has been prepared solely for information purposes. It is intended solely for the use of
professional personnel, competent to evaluate the significance and limitations of its content, and who
will accept full responsibility for the application of the material it contains. The National Ready Mixed
Concrete Association and any other organizations cooperating in the preparation of this report strive for
accuracy but disclaim any and all responsibility for application of the stated principles or for the
accuracy of the content or sources and shall not be liable for any loss or damage arising from reliance on
or use of any content or principles contained in this report. Unless otherwise indicated, all materials in
this report are copyrighted to the National Ready Mixed Concrete Association. All rights reserved.
1
Survey of Insurance Costs for Multifamily Buildings
Constructed with Wood-frame and Concrete
Dr. Pieter VanderWerf, Pauline Chang, Matthew Collings, Kristin Myer, and Charles Prest,
Boston College
Executive Summary
The objective of this project study was to replicate the 2017 study comparing insurance premium
quotes for builder’s risk insurance (during construction) and commercial property insurance (during
occupancy) for a Reference Building built using combustible construction (wood-frame) and
noncombustible construction (concrete) in five Reference Cities. The Reference Building is a
100,000-square-foot, 4-story apartment building with 15 one-bedroom apartments and 8 two-
bedroom apartments per floor. The Reference Cities are Edgewater, NJ; Towson, MD; Orlando, FL;
Dallas/Fort Worth, TX; and Los Angeles, CA. The 2017 study estimated the difference in insurance
premiums for these types of construction. One of the main drivers of the study was the magnitude
of loss in buildings each year due to structure fires.
The current study solicited quotes for the same 100,000 square foot, four-story apartment Reference
Building in the five Reference Cities.
Insurance rates are quoted as dollars of annual premium per $100 of estimated building replacement
value. Similar to the 2017 study, the rates varied widely, depending mostly on local geographic risk
factors. Different regions of the country have various levels of risk from common hazards and some
disadvantage one material more than the other.
Quotes gathered from the US insurance companies once again consistently confirmed that the cost
of insuring the Reference apartment building is lower for a building constructed of concrete instead
of wood. This applies to both builder’s risk insurance and commercial property insurance. For
builder’s risk insurance, the most significant difference was 80% less for the concrete building, and
the smallest was 36% less. For commercial property insurance, the greatest and smallest differences
found were 63% and 4% less, respectively. Figures 1 and 2 show the summary of results of Builder’s
Risk Insurance rates and Figures 3 and 4 show the summary of results of Commercial Property
Insurance rates for the 2017 and 2023 studies, respectively.
2
Figure 1. The average quotes for builder’s risk insurance for the Reference Building
in five Reference Cities in 2017 Survey
Figure 2. The average quotes for builder’s risk insurance for the Reference Building
in five Reference Cities in 2023 Survey
0.358
0.365
0.440
0.141
0.192
0.120
0.195
0.140
0.109
0.117
0.000
0.100
0.200
0.300
0.400
0.500
0.600
Edgewater, NJ Towson, MD Orlando, FL Dallas, TX Los Angeles, CA
Builder's Risk Insurance Rates
Per year per $100 of construction value
Wood Concrete
0.4325
0.45
0.61
0.5873
0.572
0.175
0.125
0.275
0.31255
0.1195
0.000
0.100
0.200
0.300
0.400
0.500
0.600
0.700
Edgewater, NJ Towson, MD Orlando, FL Dallas, TX Los Angeles, CA
Builder's Risk Insurance Rates
Per yer per $100 of construction value
Wood Concrete
3
Figure 3. The average quotes for commercial property insurance for the Reference Building
in five Reference Cities in 2017 survey
Figure 4. The average quotes for commercial property insurance for the Reference Building
in five Reference Cities in 2023 survey
In each area, for each type of insurance and each construction material, researchers secured quotes
from two different insurance agents and/or underwriters. The pairs of quotes are intended to serve as
0.372
0.396
0.211
0.219
0.233
0.158
0.256
0.170
0.161
0.151
0.000
0.100
0.200
0.300
0.400
0.500
0.600
Edgewater, NJ Towson, MD Orlando, FL Dallas, TX Los Angeles, CA
Commercial Property Insurance Rates
Per year per $100 of construction value
Wood Concrete
0.3125
0.2375
0.4145
0.23585
0.1275
0.16375
0.1445
0.3315
0.14225
0.1025
0.000
0.100
0.200
0.300
0.400
0.500
0.600
0.700
Edgewater, NJ Towson, MD Orlando, FL Dallas, TX Los Angeles, CA
Commercial Property Insurance Rates
Per yer per $100 of construction value
Wood Concrete
4
a check on the reliability of the estimated savings found for buildings constructed with concrete.
Different quotes from different companies in the same region for the same type of insurance and
building material were almost always fairly close.
The researchers received information from agents or underwriters that provided useful insight. They
explained that the industry’s quote process differs sharply from that in 2017 and now tends to be
more automated using big data techniques. Some quotes suggest that rates, and the differences
between wood frame and concrete quotes, are sharply higher in areas with a high risk of natural
disaster. Sources also reported that they are refusing to provide insurance altogether in areas of
especially high risk of natural disaster and in the case of buildings with perceived extra hazard such as
solar panels on the roof.
5
Introduction
Multifamily residential buildings are built using a variety of construction types, methods and materials.
There are many risks to property and occupants of multifamily residential buildings, including fire, water
intrusion, extreme weather and other natural disasters. Developers and building owners of multifamily
buildings must insure these buildings during construction (builder’s risk insurance) and during occupancy
over the building lifetime (commercial property insurance) against these risks.
In 2017, NRMCA commissioned a survey of insurance costs for multifamily buildings to quantify the
expected differences in costs to insure a building construction of combustible versus noncombustible
construction. One of the main drivers behind the study was the magnitude of loss in buildings each year
due to structure fires. Because combustible construction carries higher risk of fire, wind, water damage
and other losses than noncombustible construction types, it was expected that buildings constructed
using combustible materials would cost more to insure than those built with noncombustible materials.
As part of the 2017 study, quotes for insurance rates and premiums for builder’s risk insurance and
commercial property insurance were gathered for a Reference Building built using combustible
construction (wood-frame) and noncombustible construction (concrete) in five Reference Cities.
All of the insurance quotes compiled in 2017 showed the concrete apartment building was less costly to
insure than the wood frame apartment building. For builder’s risk insurance, the most significant
difference was 72% less for the concrete building, and the smallest was 22% less. For commercial
property insurance, the greatest and smallest differences found were 65% and 14% less, respectively.
The study revealed that insurers are aware of the risks of building with combustible construction and
the benefits of building with noncombustible construction. Some insurance agents suggested that the
gap between rates for wood frame and concrete would be likely to grow in the future and observed that
a growing number of insurers were declining to serve as sole insurer for wood-frame apartment
buildings.
Consequently, with the rising cost of construction, the objective of the current study is to confirm that
the difference in insurance costs for combustible versus noncombustible construction are growing. As
part of the current research, quotes were solicited for the same 100,000 square foot, four-story
apartment Reference Building in the five Reference Cities.
6
Definitions
Multifamily Residential
Multifamily residential includes traditional apartment buildings, condominium buildings, hotels, student
housing and elderly housing.
Combustible Construction
Wood-framed construction including wood stud wall framing with floors built with dimensioned lumber
or engineered wood products meeting building code requirements for Type V construction.
Noncombustible Construction
Concrete and/or masonry construction including cast-in-place concrete, precast concrete, insulated
concrete forms and load-bearing concrete masonry meeting building code requirements for Type I, II or
III construction.
Reference Building
The Reference Building is a 4-story multifamily residential (apartment building) structure encompassing
approximately 25,000 gross square feet per floor for total area of 100,000 gross square feet. The
Reference Building comprises 15 one-bedroom apartments and 8 two-bedroom apartments per floor.
See Figures 5, 6 and 7 for drawings of the Reference Building including building elevation, floor plans
and wall sections.
Figure 5: Reference Building elevation
7
Figure 6: Reference Building floor plans
8
WOOD-FRAME CONCRETE
Figure 7: Reference Building wall sections
9
Reference Cities
The Reference Cities were selected to encompass locations that are subject to different hazards to
capture differences in insurance rates in different regions of the country. Reference Cities are:
• Edgewater, NJ
• Towson, MD
• Orlando, FL
• Dallas/Fort Worth, TX
• Los Angeles, CA
Methodology for Gathering Insurance Rate Information
The investigators sought estimates of the insurance rate for a standardized building for each of the
builder’s risk and the commercial property insurance. Quotes were requested for a structure
constructed of wood frame and a structure constructed of concrete in each of the fire Reference Cities.
In each Reference City, researchers also sought an estimate of each rate (builder’s risk insurance and
commercial property insurance) from two separate companies as a check on accuracy and consistency.
This resulted in 40 separate quotations (two sources x two types of insurance x two materials x five
Reference Cities).
In the 2017 study, most of the researchers’ contacts were with insurance agents. The agents had
enough experience to make accurate quotes themselves or contacted underwriters who provided them
with the information on a quick turnaround. However, this approach was not productive in the current
study. The quote process was observed to be much more time intensive. Most agents were unable or
unwilling to provide quotes for a hypothetical building. In many cases, researchers were more
successful when contacting underwriters directly, whether independent or part of a carrier. Although
underwriters do not generally deal with the public, they were observed to be in the best position and
more willing to provide quotes for the current study. In some cases, other parties than underwriters did
provide quotes. Therefore, sources for insurance rate information in this study will be referred to as
“interviewees.”
Reference Building
The investigators requested interviewees to provide rate quotes for a four-story apartment
building
with 15 one-bedroom apartments and 8 two-bedroom apartments occupying 25,000 square feet of floor
space on each floor, for a total of 92 apartments and 100,000 square feet of floor space.
Whenever questions of building details other than materials arose, they instructed the
interviewers
10
to assume whatever is most common local practice. However, even with this approach, the
interviewees felt they needed guidance in some specifics. Many required an exact address. In this
case, the researchers simply picked a plausible address in the target area. In other cases, the
interviewees did not want to make a guess as to what was most “common” in their area for such
attributes as whether the building had fire sprinklers or whether they would be under guard 24 hours
a day during construction. In this case, the researchers asked someone local what is typical and
supplied this to the interviewee.
Most interviewees created a new set of quotes specifically for this exercise. This differed from
observations in the 2017 study, where about half of the agents interviewed created a new set of
quotes specifically for this exercise, assuming the building as described. Creating a new set of quotes
for the purposes of the 2023 study, however, required supplying or assuming a large arrange of
numbers that could be fed into a complex computer calculation. A few experienced industry personnel
felt confident with a manual calculation based on the building parameters and location alone.
Metropolitan Area
The difficulty in obtaining quotes motivated the researchers to expand the areas from which they were
willing to take quotes. Thus, the metropolitan area of a city in this study is understood to mean within
the city limits or within 50 miles of them.
Second Quotes
The research team followed a strict policy of accepting only one set of quotes in a region from one
source. For example, if one agency in New Jersey provided builder’s risk insurance quotes (one for
wood frame and one for concrete) for Towson, then the team would not seek or accept a second set of
quotes for builder’s risk insurance in the Towson area from the same organization. This allowed for
comparing different quotes from the same region to help determine the extent to which quotes for a
single insurance scenario are consistent and reliable independent of the source.
Most companies offered only builder’s risk insurance or commercial property insurance. However, in
cases where one organization provided both, the researchers would accept quotes for both types of
insurance from the same organization. They then sought the alternative quotes for the region from
other organizations. A few large insurance companies offered insurance in more than one of the study
regions. In this case, the researcher sometimes got a set of quotes in more than one region from the
company, but then found a second set in each region from another organization.
A few organizations provided a quote in a region and a type of insurance for one material but not the
other. The team saved these in case they provided interesting additional information, but they are
never included in the primary reported data set. If a quote for a concrete structure in a given scenario
came from one company and a quote for a wood frame structure came from another, there would be no
practical way to isolate how much of the difference of rates was due to the material.
11
The Process of Developing Building Insurance Quotes
Traditionally, multiple parties are involved in the determination of both builder’s risk insurance and
commercial property insurance premiums. Industry data warehouse companies supply extensive
statistics on historical damage and insurance payouts for all types of buildings. Analysts insert these
data into mathematical models to produce recommended insurance rates for specific properties. They
provide these rates to underwriters who may adjust them and have final say in the rate to quote for a
building. The underwriters may add strategic business factors and personal judgment from experience
into their determination of the final rate.
Over the course of the 2017 study, quotes were routinely made with a relatively simple equation. The
typical quotation included a more-or-less fixed charge for policy loan and origination, plus a set of
added amounts for each potential source of damage (called a peril) to be covered by the policy. All of
these amounts could vary somewhat by insurance company, and particularly the peril changes could
vary widely by geography. For example, the charge for wind damage was sharply higher in coastal
areas. Similarly, the charge in builder’s risk insurance for theft was much lower for projects with
extensive security measures. In general, the charge for any given peril might be higher or lower
depending on the specifics of the project and how those specifics influenced the level of risk of the
particular peril.
The calculation for a project also varied according to what perils the policy was written to include. For
each peril included, the appropriate charge for that peril was added. The charge for any excluded
perils was not added in.
It was observed in the current study that the quote process of insurance companies today is sharply
different than the process was in 2017. Instead of a simple equation, quotes are usually made by
supplying a much larger number of project details into a computer program. The program executes a
more complex calculation to get the quote. It appears that the program of different companies may
be quite different from its competitors.’ However, the results appear to be very similar. The
interviewees more familiar with the methods explained that the same sorts of factors were included
and influenced the final rates in similar ways. All of this held true for the insurance agents and the
underwriters contacted by the researchers.
The researchers often did not have all the details for their hypothetical project that the programs
required. In these cases, they provided the building specifications, a suitable address gleaned from
the internet, and asked that every other specification be what was typical for the area. They also
specified that all factors other than the material be the same for both the concrete and wood frame
versions of the building.
Similar to the 2017 study, researchers found insurance rates generally to be expressed as a number of
dollars per year per $100 of building replacement cost, permitting rapid recalculation of the total
premium as the estimated cost of the building changes.
Although the replacement cost of a building may vary from the original construction cost, the two
12
figures are typically close. It is common to estimate the total annual insurance premium by multiplying
the underwriter’s insurance rate by the construction cost.
Builder’s Risk Insurance
Builder’s risk insurance protects the insurable interest in materials, fixtures and/or equipment being
used in the construction or renovation of a building or structure should those items sustain physical
loss or damage from a covered peril. The policy can be taken out by either the contractor or the owner
of the property.
The general factors that determine insurance rates are the same currently as they were in 2017. Now
they are simply weighted and combined with relatively complex computer programs instead of simple
formulas.
Builder’s risk policies usually include similar coverage across carriers. This appears to be relatively the
same as was observed in 2017. The industry norm is that a builder’s risk insurance policy covers the
perils fire, wind, lightning, explosion, vandalism, and theft. Some other perils are covered in the
standard policy in some areas of the country. However, the increment to the premium varies widely,
reflecting the variation in risk from these perils from location to location. The most common of these
additional perils is hail. In places where coverage for these perils is not standard, it may be added to
the standard policy as a so-called extension at an appropriate extra charge for each peril. However,
they may not be available even as extensions in some areas.
A few other perils are almost never standard, but are frequently available as extensions. The most
common of these are earthquake, flood, back-ups from sewers and drains, and damage to equipment
and materials in transit to the job site. Some perils are routinely expressly excluded from coverage
with no option for an extension. Chief among these are employee theft, weather damage to property
left in the open, war and government action.
A policy is usually written to cover 100% of replacement cost. In the event of a claim on insurance,
the insured is to record all damages and how they occurred, the cost of replacement and submit a
written note to the insurer. The insurer will make a “hard and soft” cost valuation. “Hard costs” are
the costs to replace a material loss, while “soft costs” are the costs accrued due to relocation, loss of
time, legal counsel, architectural and engineering services, and other new or extended costs due to
the incident.
Underwriters and insurance agents are highly interested in the on-site safety practices and the loss
history of the contractor while determining the rate for a builder’s risk policy. On-site smoking,
carelessness with fire torches and other flame equipment are large contributors to fire damage.
Policy rates may be adjusted should precautions be found lax.
Construction materials impact rates through their influence on the likelihood and magnitude of
claims from the covered perils. Concrete structures are generally considered to be less susceptible to
damage from fire, wind, and water damage. In areas of the country where such perils are common,
the difference between wood frame and concrete building rates are accordingly higher.
13
Commercial Property Insurance
Commercial property insurance provides financial reimbursement to the owner of a building that is in
operation or occupied for the structure and its contents. The determination of commercial property
insurance rates is mostly the same as it is for builder’s risk insurance rates, with some differences in
details.
The coverage of commercial property policies varies more across carriers than the coverage of
builder’s risk insurance policies and rates tend to vary more as a result. A typical commercial property
insurance policy covers the perils of fire, wind, hail, lightning, theft, vandalism and some types of
water damage. Water damage caused by floods, tsunamis, drain backups, sewer backups,
groundwater seepage, standing water and many other water sources do not typically come standard,
but are frequently purchased as extensions. Mold, earthquakes, and nuclear events and acts of war
are normally expressly excluded with little or no opportunity for extension.
Filing a claim is similar to the process for a builder’s risk policy, but coverages will be organized
around the real property loss, personal property loss, business interruption (the costs to cover lost
rent or other income that was lost as a direct result of the damage), extra expense (costs to continue
business on a temporary basis elsewhere) and increased cost of construction (due to changes such as
new building codes or inflation).
The protection class (a measure of how prepared a structure is to fight a fire, the proximity to a fire
department, the percent of the building that is sprinklered and the like) and the proximity to known
catastrophic weather such as forest fires and hail are considered the most influential factors for
determining the premium for a property policy. Fire is the largest cause of damage to multifamily
structures and, as such, rates will correspond largely to the amount of fire risk on the property.
Insurance Rate Quotes for the Reference Building
Below are the insurance rate quotes obtained from insurance agents interviewed for the Reference
Building in the five Reference Cities. All quotes are in dollars per year per $100 of building replacement
cost.
In or near Edgewater, NJ
Builder’s Risk
Quote 1
Quote 2
Wood
0.45
0.415
0.4325
Concrete
0.175
0.175
0.1750
Percentage savings
61.1%
57.8%
59.5%
14
Commercial Property
Quote 1
Quote 2
Wood
0.35
0.275
0.3125
Concrete
0.2125
0.115
0.16375
Percentage savings
39.3%
58.2%
47.6%
Towson, MD
Builder’s Risk
Quote 1
Quote 2
Wood
0.45
0.45
0.45
Concrete
0.1
0.15
0.125
Percentage savings
77.8%
66.7%
72.2%
Commercial Property
Quote 1
Quote 2
Wood
0.135
0.34
0.2375
Concrete
0.129
0.16
0.1445
Percentage savings
4.4%
52.9%
39.2%
Orlando, FL
Builder’s Risk
Quote 1
Quote 2
Wood
0.55
0.67
0.61
Concrete
0.35
0.2
0.275
Percentage savings
36.4%
70.1%
54.9%
Commercial Property
Quote 1
Quote 2
Wood
0.43
0.399
0.4145
Concrete
0.29
0.373
0.3315
Percentage savings
32.6%
6.5%
20.0%
15
Dallas/Fort Worth, TX
Builder’s Risk
Quote 1
Quote 2
Wood
0.6106
0.564
0.5873
Concrete
0.2756
0.3495
0.31255
Percentage savings
54.9%
38.0%
46.8%
Commercial Property
Quote 1
Quote 2
Wood
0.2
0.2717
0.23585
Concrete
0.184
0.1005
0.14225
Percentage savings
28.0%
63.0%
39.7%
Los Angeles, CA
Builder’s Risk
Quote 1
Quote 2
Wood
0.425
0.719
0.572
Concrete
0.1
0.139
0.1195
Percentage savings
76.5%
80.7%
79.1%
Commercial Property
Quote 1
Quote 2
Wood
0.135
0.12
0.1275
Concrete
0.105
0.1
0.1025
Percentage savings
22.2%
16.7%
19.6%
Patterns in the Data
Every pair of quotes in the same region-insurance type scenario from the same organization showed a
lower rate for the concrete structure versus the wood frame. However, the magnitude of the quotes
across types of insurance and across regions varied widely, and the magnitude of the difference
between concrete and wood quotes tended to vary with them.
Estimated builder’s risk insurance premiums were always higher than commercial property insurance for
wood structures. In many cases, the difference was large, double or more. According to our
interviewees, this is because occupied buildings tend to be more protected than buildings under
construction. For example, occupied buildings are protected by automatic fire sprinklers and fire alarm
and detections systems, and some have on-site caretakers.
16
For concrete buildings, the difference between builder’s risk insurance and commercial property
insurance quotes is consistently much closer and is sometimes reversed. This is apparently because
some of these risks were already low during construction. For example, a concrete structure under
construction does not need active sprinklers to be fire-resistant. After the building is occupied, it may
actually be more at risk of serious fire damage because of flammable finishings and contents.
The result is the advantage of concrete versus wood appears to be sharply greater for builder’s risk
insurance and commercial property insurance. At the extreme, the estimated average reduction in
insurance premium from building with concrete in Los Angeles was approximately 19 times as great for
builder’s risk insurance than commercial property insurance. Mathematically, this was in part because
Los Angeles had some of the highest estimated average builder’s risk insurance rates (and therefore a
large difference in builder’s risk insurance across materials), but some of the lowest commercial
property insurance rates (and therefore a small difference in CPI rates across materials).
As suspected, insurance rates varied substantially across regions. Builder’s risk rates were lower in the
Northeast and higher in the Southern states. This reflects greater risk from fire in the Southwest and
wind in the Southeast. However, for commercial property insurance, Florida stands out with the highest
rates and those for Texas and California fall sharply to be in line with, or lower than, those of New Jersey
and Maryland.
The rates across different insurance organizations within the same region-material scenario are
consistently close, compared with the differences across regions and across materials. As one might
expect, some of the greatest differences across insurance companies occur in scenarios where the
absolute numbers are high. For example, the greatest difference in the quotes from two different
companies occurs in builder’s risk insurance for a wood frame building in the Los Angeles region, with a
gap of 0.294 dollars per hundred. But this is the insurance type-material scenario with nearly the
highest estimated average rate overall. This sort of consistency provides some confidence that the
quotes received are reliable.
Other Findings
Additional interesting information arose over the course of the study from some sources. The research
team received a few extra quotes that were out of the Reference City regions in the study but helped
gauge the impact of coastal locations and their high wind risk on insurance rates. One interviewee
provided quotes for CPR for buildings in Ocean City, MD, when solicited for quotes for the Towson area.
Ocean City is on Fenwick Island, a narrow barrier island between the Atlantic Ocean and the isle of
Wight Bay. Exposure to the wind and storms of the Atlantic on Ocean City is extreme. The underwriter
interviewed quoted CPT rates of 0.4426 $/hundred for a wood frame building and 0.2645 $/hundred for
concrete. This is nearly double the average rates quoted for the Towson region.
A source in Florida asked to quote for a policy in Orlando advised that their company provides builder’s
risk insurance only in and around Lakeland. Lakeland is much farther from the Atlantic than Orlando.
Lakeland is closer to the Gulf of Mexico, but not as close as Orlando is to the Atlantic, and the eastern
Gulf is considered the less risky coast. The source provided a quote for builder’s risk insurance for a
17
concrete building in Lakeland of 0.165 $/hundred, which is somewhat lower than either of the other two
quotes for builder’s risk insurance for concrete in Orlando. The source also stated that their company
does not insure wood frame structures at all, and indicated that this was a common practice for
companies insuring buildings along the coast. This is a significant difference in outcome from the 2017
study, where no interviewee stated that any insurance companies refused to cover any wood-frame
apartment buildings as a matter of blanket policy.
Similarly, an interviewee in Southern California shared that their company had a policy against insuring
wood frame buildings with solar panels on the roof. They considered the risk of electrical fires from the
electrical power equipment to be too high.
18
Estimating Insurance Premiums for the Reference Building
Given the insurance rates quoted in this report, it is possible to estimate insurance premiums for the
Reference Building used for this study. A 100,000-square-foot apartment building would cost
approximately $14,000,000 to build. This would vary by city, but for the purposes of this example we
will assume the cost of construction is constant. The building would take 15 months to complete.
BUILDER’S RISK PREMIUM = RATE x CONSTRUCTION COST/100 x CONSTRUCTION MONTHS/12 total
COMMERCIAL PROPERTY INSURANCE PREMIUM = RATE x CONSTRUCTION COST/100 annually
To calculate insurance premium for Edgewater, NJ:
BUILDER’S RISK PREMIUM (Wood) = 0.4325 x $14,000,000/100 x 15/12 = $75,688 total
BUILDER’S RISK PREMIUM (Concrete) = 0.175 x $14,000,000/100 x 15/12 = $30,625 total
COMMERCIAL PROPERTY INSURANCE PREMIUM (Wood) = 0.3125 x $14,000,000/100 = $43,750
annually
COMMERCIAL PROPERTY INSURANCE PREMIUM (Concrete) = 0.16375 x $14,000,000/100 = $22,925
annually
A summary of builder’s risk insurance premiums and property insurance premiums for the Reference
Building in all five Reference Cities are shown in Figure 8 and 10, respectively. Figures 9 and 11 show
the previous premiums published for builder’s risk insurance and commercial property insurance in the
2017 study.
In comparing the estimations in 2023 and 2017, it can be observed that the cost of insurance premiums
for builder’s risk insurance has increased over time as expected. For commercial property insurance, a
sharp increase between 2017 and 2023 is observed for Orlando, Florida, likely due to extreme weather
experienced due to its coastal location.
The gap between rates for wood frame and concrete for both builder’s risk insurance and commercial
property insurance has also grown in most cities as anticipated by agents interviewed during the 2017
study.
19
Figure 8: Estimated builder’s risk insurance premiums for the Reference Building
in five Reference Cities in 2023 Survey
Figure 9: Estimated builder’s risk insurance premiums for the Reference Building
in five Reference Cities in 2017 Survey
$75,688
$78,750
$106,750
$102,778
$100,100
$30,625
$21,875
$48,125
$54,696
$20,913
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
Edgewater, NJ Towson, MD Orlando, FL Dallas, TX Los Angeles, CA
Total Builder's Risk Insurance Premiums
for Reference Building
15 month construction period
$14 million construction replacement cost
Wood Concrete
$62,650
$63,875
$77,000
$24,675
$33,600
$21,000
$34,125
$24,500
$19,075
$20,475
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
Edgewater, NJ Towson, MD Orlando, FL Dallas, TX Los Angeles, CA
Total Builder's Risk Insurance Premiums
for Reference Building
15 month construction period
$14 million construction replacement cost
Wood Concrete
20
Figure 10: Estimated commercial property insurance premiums for the Reference Building
in five Reference Cities in 2023 Survey
Figure 11: Estimated commercial property insurance premiums for the Reference Building
in five Reference Cities in 2017 Survey
43,750
33,250
58,030
33,019
17,850
$22,925
$20,230
$46,410
$19,915
$14,350
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
Edgewater, NJ Towson, MD Orlando, FL Dallas, TX Los Angeles, CA
Estimated Annual Commercial Property Insurance
Premiums for Reference Building
$14 million construction replacement cost
Wood Concrete
$52,080
$55,440
$29,540
$30,660
$32,620
$22,120
$35,840
$23,800
$22,540
$21,140
$0
$20,000
$40,000
$60,000
$80,000
$100,000
Edgewater, NJ Towson, MD Orlando, FL Dallas, TX Los Angeles, CA
Estimated Annual Commercial Property Insurance
Premiums for Reference Building
$14 million construction replacement cost
Wood Concrete
21
Estimating Insurance Premiums for Other Buildings in Other Cities
For the purposes of roughly estimating insurance rates for other buildings in other cities across the
United States, one could select rates from this report for cities that have similar hazards. For example,
insurance rates for a 150,000-square-foot condominium building in New Orleans could be assumed to
be similar to rates for a 100,000-square-foot condominium building in Orlando, FL, since both cities are
subject to hurricane risks and both buildings are similar in function. One would simply have to adjust
the estimated construction cost and time of construction to obtain an estimate of insurance premiums
for the New Orleans building.
Similarly, a long-term care facility in Tulsa, OK, could be assumed to have similar risks and insurance
rates to Dallas/Fort Worth since both are at risk for wind and hail damage. A building in Seattle could be
considered to have similar risks as a building in Los Angeles since both are in earthquake prone areas.
That said, it is always advisable to contact insurance agents in a specific city to obtain accurate rate
quotes for a specific building.
Conclusions
The empirical data presented in this report suggests that building insurance rates continue to be lower
for mid-rise apartment buildings constructed with concrete instead of wood-frame. This applies to both
builder’s risk and commercial property insurance and across a wide range of regions of the United
States.
As suspected, insurance rates varied substantially across regions. However, different quotes from
different companies in the same region for the same type of insurance and building material were
almost always fairly close. Estimated builder’s risk insurance premiums were always higher than
commercial property insurance for wood structures. In many cases the difference was large, double or
more. While the extent of the insurance savings for a concrete building varied widely for builder’s risk
insurance quotes, it was within the range of 36%-80% for all regions. This compared to a range of 22%-
72% savings for all regions in the 2017 study. The greatest savings in builder’s risk insurance quotes for
the current study came from the Los Angeles area, with an average savings of nearly 80% for the
concrete building over the wood frame building.
Commercial property insurance quotes were lower across the board. Final rates vary as much as they
do with builder’s risk insurance, for the same reasons. This includes lower rates for concrete structures
because of lower fire, wind, and water risk. For commercial property insurance, the quoted savings for
the 2023 study were within the range of 4%-63%, compared to quoted savings in the 2017 study in the
range of 14%-65%. The largest average savings in commercial property insurance between the concrete
22
and wood frame buildings came from the Edgewater, NJ, area, with a savings of nearly 48%, compared
with a nearly 20% difference in savings in the Los Angeles area.
As expected, the cost of insurance premiums for builder’s risk insurance has increased over time and
the gap between rates for wood frame and concrete for both builder’s risk insurance and commercial
property insurance has also grown in most cities as anticipated by agents during the previous 2017
study.
Researchers of the current study received extra quotes or information from some of the interviewees
that provided potentially useful insights. They explained that the industry’s quote process is generally
more highly automated using big data techniques and is therefore much less transparent than in the
past. Some extra quotes suggest that rates, and the difference between wood frame and concrete
quotes, are sharply higher in areas with a high risk of natural disaster. Sources also reported that they
are refusing to provide insurance altogether in areas of especially high risk of natural disaster and in the
case of buildings with solar panels on the roof.
National Ready Mixed Concrete Association
Founded in 1930, the National Ready Mixed Concrete Association is the leading industry advocate. Our
mission is to provide exceptional value for our members by responsibly representing and serving the
entire ready mixed concrete industry through leadership, promotion, education and partnering to
ensure ready mixed concrete is the building material of choice.
National Ready Mixed Concrete Association
66 Canal Center Plaza, Suite 250
Alexandria, VA 22314
www.nrmca.org