3 Hidden Insurance Pitfalls Apartment Building Owners Should Watch For

When you own or manage apartment buildings, you’re not just maintaining property — you’re protecting a business, an investment, and the people who live there. That’s why it’s critical to look beyond the surface of your insurance policy.

Even well-structured policies can include hidden gaps or limitations that lead to major out-of-pocket expenses when claims happen. Below are three of the most common issues we uncover when reviewing apartment building insurance policies — and how to protect yourself before renewal season.

1. Water Damage Exclusions and Sublimits

Water damage is the most common and most costly type of loss for apartment owners. From burst pipes to leaking appliances, even a small incident can cause tens of thousands of dollars in damage across multiple units.

Many carriers are tightening their stance on water-related claims — introducing sublimits (for example, capping water damage coverage at $10,000–$25,000) or excluding water damage altogether.

This is especially important if your property’s plumbing is more than 30 years old. In many cases, carriers will automatically apply these limitations or even decline full water coverage until plumbing systems are updated.

What to do:

• Review your declarations page and endorsements for any mention of a “water damage sublimit.”

• Confirm whether coverage applies to sudden and accidental water discharge or excludes gradual leaks.

• Ask your broker if sewer backup, overflow, and water mitigation costs are covered or excluded.

Pro Tip: Updating plumbing, adding leak sensors, or installing automatic shutoff valves can help you qualify for broader water coverage and lower deductibles.

2. Animal Exclusions and How They Affect Liability

Many landlords are surprised to learn that their liability coverage excludes claims involving animals — particularly dog bites.

Even if your building has a “no pets” policy, tenants may still have emotional support animals or unauthorized pets, creating exposure if an incident occurs on your property. Some carriers exclude specific breeds, while others exclude any animal-related injury entirely.

What to do:

• Review your liability section for animal or dog liability exclusions.

• If pets or emotional support animals are allowed, ask your broker about adding an endorsement to restore coverage.

• Require tenant liability insurance in lease agreements — this can shift small pet-related claims away from your policy.

Pro Tip: Carriers often look favorably on properties with pet screening services or clearly defined pet policies — it demonstrates proactive risk management.

3. Replacement Cost Limits That Are Too Low

Rising labor and material costs have caused rebuild values to skyrocket in recent years. Many apartment buildings are still insured at outdated valuations — often 20–40% below actual replacement cost.

If your policy doesn’t reflect current rebuild costs, you risk becoming underinsured. Most policies also include a coinsurance penalty if you carry limits below the required threshold. In a total loss, that could mean you only receive a fraction of the payout you expect.

What to do:

• Recalculate your replacement cost per square foot annually — in many markets, it’s now $250–$400+ per sq. ft.

• Review whether your policy includes a coinsurance clause and whether that penalty can be waived.

• Ask your broker for a professional replacement cost estimator before your next renewal.

Pro Tip: Review your policy to determine if there is a coinsurance penalty and ensure your building is insured for its full replacement value.

Final Thoughts

Insurance isn’t just about finding the lowest premium — it’s about ensuring the policy performs when you need it most.

A quick annual review focusing on water damage coverage, liability exclusions, and accurate replacement cost valuations can prevent major coverage surprises later.

If you’d like help reviewing your apartment building policy, UWIB Risk can provide a side-by-side analysis highlighting any exclusions or sublimits that might affect you — along with competitive options from our carrier network.

UWIB Risk Inc.
Independent. Experienced. Focused on protecting what you’ve built.

We’re here to help you stay compliant with your state’s regulations and can assist in arranging coverage to transfer risks from your shoulders to a trusted insurance carrier.

If your liquid assets are over $3 million, we recommend a complimentary Private Client coverage review with UWIB Risk. This review is designed to ensure you’re fully protected, and it could offer valuable insights into your coverage needs.

Take advantage of this cost-free opportunity to safeguard your assets. Schedule your Private Client Review today!