Why is insurance different on a 5 unit building than a 4 unit?
At five units the building stops being residential and becomes commercial property, so it moves to a commercial package with general liability, business income you have to size yourself, and a real underwriting file. That is a different form, a different underwriter and usually a different price per unit.
LA County has 70,776 buildings on the commercial side of that line, and 41,779 of them have 5 to 16 units. That band is where most first-time owners land.
What changes
| 2 to 4 units | 5+ units | |
|---|---|---|
| Policy form | Dwelling or landlord package | Commercial property and general liability |
| Loss of rents | Often included as fair rental value | Business income, you set the months |
| Ordinance and law | Small sublimit or none | A, B and C, you set the limits |
| Underwriting | Light | Inspection, update history, claims, soft-story, zones |
| Typical price per unit | Lower | $1,500 to $2,500 on older LA buildings |
The step up is not only cost. It is control. On a commercial policy you choose the loss of rents months and the ordinance and law limits, which is exactly where the inherited policies I read go wrong.
Questions owners ask me about the 4 to 5 unit line
- How much does insurance cost on a 4 unit apartment building?
Less per unit than a 5 unit building, because it is still written on residential landlord forms with light underwriting. The jump happens at the fifth unit, where older LA buildings run $1,500 to $2,500 per unit per year. - Is a fourplex commercial or residential insurance?
Residential, on a dwelling or landlord form, at most carriers. Five units and up is commercial property with a separate general liability line. - Why does the price jump at five units?
Different form, different market and real underwriting. A commercial file brings an inspection, an update history, a claims run and questions about soft-story and zones, and it brings coverages such as ordinance and law that a landlord form barely offers. - Can I put a fourplex and a 5 unit building on one policy?
Usually yes. Once you own a commercial policy, additional buildings can be scheduled on it, which is simpler than juggling renewal dates and is often better priced than separate policies.
Check your buildingFree. Public records only. No quote, no obligation.