Are You Overpaying for Property Insurance? How to Benchmark Your Premiums and Coverage
Insured AI Team
Most property management and ownership companies renew their insurance year after year with the same broker, accepting modest rate increases as the cost of doing business. The problem: without benchmarking, you have no way of knowing whether your premiums are competitive, your coverage limits are adequate, or your portfolio is being rated fairly.
In a market that saw commercial property insurance rates climb 15–45% annually from 2023 to 2024 - only to soften to just under 3% average increases in 2025 - the difference between a well-benchmarked portfolio and an unreviewed one can be substantial. Here's what benchmarking actually means for property companies, and how to do it properly.
What Benchmarking Means for Property Insurance
Benchmarking in property insurance has two dimensions: premium benchmarking (are your rates competitive for assets like yours?) and coverage benchmarking (are your limits and terms in line with comparable portfolios?).
These are distinct problems. A company can be paying market-rate premiums on coverage that's still inadequate for its actual exposure - or carrying excellent limits on a policy that's overpriced relative to peers. You need to assess both.
Benchmark 1: Premium Per Square Foot
The most common starting point for property insurance benchmarking is cost per square foot. Industry averages vary significantly by asset class, geography, and risk profile, but they give you a reference point to assess whether your rates are in range.
For multifamily residential, per-square-foot costs have risen sharply over the past few years. A building that cost $0.75 per square foot to insure in 2022 might now run $1.00–$1.15 in a moderate-risk market. In high-CAT states the increases have been far steeper: California multifamily assets that cost $1.50 per square foot in 2022 can now run $2.70 or higher - a near-doubling in two years
For commercial portfolios, per-square-foot calculators provide a rough baseline, but actual benchmarking requires layering in occupancy type, construction class, age of building, and geographic CAT exposure before any comparison is meaningful.
The key question isn't just what you're paying - it's what comparable assets are paying, in comparable markets, with comparable risk profiles.
Benchmark 2: Replacement Cost Valuation
One of the most common - and costly - benchmarking failures is misaligned replacement cost valuation. If your insured values haven't been updated to reflect current construction costs, you're likely underinsured, and exposed to coinsurance penalties in the event of a claim.
Construction costs rose sharply through 2022 and 2023 and have not fully retreated. A building valued at $5M for insurance purposes in 2020 may cost $7M or more to replace today. If your policy was written on that original value and hasn't been adjusted, you're not just underinsured - you're at risk of having a partial loss claim paid out at a fraction of actual repair cost.
Approaches to keeping valuations current include third-party appraisals, inflation-adjusted fixed-asset records, and cost-per-square-foot tools cross-referenced against local construction indices. Any of these is better than letting the number sit unchanged at renewal.
The Insurance Information Institute has flagged valuation accuracy as one of the central issues for commercial property owners navigating the current market.
Benchmark 3: Coverage Terms and Limits
Premium benchmarking tells you whether you're paying the right price. Coverage benchmarking tells you whether you're buying the right product.
Key terms to benchmark against peers include:
General liability limits. For commercial portfolios, $1M per occurrence / $2M aggregate is a common floor, but larger portfolios and higher-traffic properties often carry $5M or more. If your limits haven't scaled with your portfolio, you're exposed.
Named perils vs. all-risk. Most sophisticated property companies carry special-form (all-risk) coverage. If you're on a named-perils policy, that's worth examining - especially as climate-related exposures expand.
Deductible structure. Wind, hail, and CAT deductibles are often percentage-based rather than flat amounts, and vary significantly across policies. A 2% wind deductible on a $20M building is a $400,000 out-of-pocket exposure. Benchmarking deductible structures across your portfolio can surface inconsistencies and underexposed risks.
Business interruption / loss of rents. Coverage periods here vary widely. Standard policies may offer 12 months; well-structured ones cover 18–24. For commercial properties with longer lease-up timelines, the difference is material.
Where the Market Stands Right Now
The current market is, in the words of brokers surveyed by Insurance Journal, "the best market from a client perspective in the last seven years." Capacity has increased, competition is up, and well-managed portfolios are seeing rate decreases of 10–20% at renewal.
According to Brown & Brown's Q1 2025 market report, benign portfolios - clean loss history, strong risk controls, accurate valuations - should expect rate changes of -5% to +5%. Top-tier accounts are doing better. If you're not in that range, the question is why.
This is exactly the kind of market where benchmarking pays off. If your portfolio has improved - better loss history, updated valuations, documented risk controls - but you're still seeing increases, that's a signal to test the market, not accept the renewal.
What Good Benchmarking Requires
Benchmarking isn't a single conversation with your broker. It requires:
- Organized portfolio data: property schedules, current insured values, loss runs for at least 5 years, and current policy terms across all locations
- Comparable market data: rates and terms for similar asset types in similar geographies
- A clean submission: underwriters reward accuracy and completeness; a well-documented portfolio commands better pricing
The challenge for most property management and ownership companies is that this data sits across multiple brokers, policies, and systems - making apples-to-apples comparison difficult without significant manual effort.
The Bottom Line
Benchmarking isn't just a budgeting exercise. It's how you identify whether you're carrying adequate coverage, whether your valuations are current, and whether your premiums reflect the actual quality of your portfolio. In a softening market, companies that benchmark well are capturing meaningful savings. Those that don't are leaving money on the table - or worse, discovering coverage gaps at claim time.
