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.