Why Water Damage, Fire & Liability Are the Top Claims for Multifamily Rentals

Nate Jones, CPCU, ARM, CLCS, AU
3 days ago
2 min read

Multifamily rental properties face a higher frequency and severity of insurance claims than single-family rentals. Among all losses, water damage, fire, and liability claims consistently rank as the most common and costly under multifamily insurance policies.

Understanding why these claims occur—and how multifamily rental insurance responds—can help apartment owners reduce risk and avoid coverage gaps.

Water Damage: The Most Frequent Multifamily Claim

Water damage is the leading cause of claims in multifamily rental insurance due to shared plumbing systems and unit density.

Common causes include:

Burst or leaking pipes
Failing water heaters
HVAC condensation overflow
Appliance malfunctions

A single leak can affect multiple units, significantly increasing repair costs.

Standard multifamily insurance typically covers sudden and accidental water damage, but slow leaks and maintenance-related issues may be excluded.

Fire Damage: High Severity, High Cost

While fires occur less frequently than water losses, they cause some of the largest claims in multifamily rental insurance.

Fire-related risks include:

Electrical system failures
Cooking-related fires
Heating equipment malfunctions
Dryer lint buildup in shared laundry areas

The National Fire Protection Association reports that apartment fires often result in greater losses due to multiple displaced tenants and shared structural components.

Multifamily insurance usually covers structural damage, debris removal, and may include loss of rental income coverage while repairs are completed.

Liability Claims: The Legal Exposure Owners Can’t Ignore

Liability claims are among the most unpredictable and expensive losses for apartment owners. Multifamily insurance liability coverage protects against lawsuits related to:

Slip-and-fall injuries in common areas
Poor lighting or unsafe stairwells
Ice and snow removal failures
Negligent property maintenance

Legal defense costs alone can be significant. The Insurance Information Institute emphasizes that liability claims often exceed property damage costs when lawsuits escalate.

Many owners add umbrella liability coverage to extend protection beyond standard policy limits.

Why Multifamily Rentals Face Higher Claim Risk

Compared to single-family rentals, multifamily properties have:

More occupants and guests
Shared utilities and infrastructure
Common areas requiring ongoing maintenance
Increased exposure to lawsuits

The National Apartment Association notes that tenant density and building age are key factors driving higher claim frequency in apartment properties.