“Habitational” is an underwriting word, not a marketing one, and if it appears in a conversation about your property you should pay attention — because it means the account is being routed to a smaller set of carriers with tighter terms. The property side of habitational is genuinely soft right now. The liability side is one of the hardest classes in the country, and the published market commentary does not expect that to change soon.
What is habitational insurance?
Habitational is the class of commercial property and casualty insurance covering buildings where people live rather than work: apartment complexes, multifamily buildings, condominium and homeowners associations, student housing, senior living, assisted living, mobile home communities, and affordable housing programs such as Section 8 and Section 42 properties.
A habitational program typically bundles commercial property, general liability, business income or rental value, equipment breakdown, crime, and an umbrella or excess layer, with cyber increasingly added. What separates it from ordinary commercial property is not the building. It is the fact that people sleep there — which creates 24-hour occupancy, resident-on-resident and third-party incidents, habitability obligations, and a plaintiff-friendly claim profile that ordinary commercial risks do not have.
Why is habitational so hard to insure?
Five reasons, and they compound.
1. The casualty market has retreated from the class
Lockton’s February 2026 Real Estate and Hospitality Market Update states that the casualty market “remains a challenge for habitational assets, with insurers seeking rate increases, higher self-insured retentions, compressed limits, and tighter terms.” It notes that most retail insurers have exited multifamily, with wholesale markets and new entrants absorbing the appetite — and that softening on the casualty side “does not appear to be on the horizon in the near term.”
The macro numbers agree. Marsh’s Global Insurance Market Index for the second quarter of 2026 reports casualty rates up 2% globally and 7% in the United States, even as overall commercial rates fell 6% and property fell 12%.
2. Exclusions are doing the underwriting
Lockton reports liability insurers imposing exclusions on habitational, commercial, and hospitality properties for habitability, assault and battery, firearms, and liquor liability. Those are not edge cases in multifamily — habitability and assault and battery are two of the most common serious claim types the class produces. A policy that excludes them looks like coverage on the declarations page and behaves like a retention in a lawsuit.
3. Umbrella capacity has compressed
Lead umbrella layers of $5 million are now common, some insurers are offering only $2 million, and $10 million lead layers are “difficult to obtain in the current casualty market.” Building a $25 million tower now takes more layers, more carriers, and more time than it did three years ago.
4. Litigation pressure keeps severity rising
The American Tort Reform Association reports legal services advertising in the United States reached $2.5 billion across 26.9 million ads in 2024. Habitational claims — premises security, habitability, mold, injuries on site — sit directly in the path of that spend.
5. Certain subclasses have very few markets
Lockton flags that student housing and lower-income rental assets such as Section 8 and Section 42 properties “are more difficult to place amid insurers’ limited appetite for writing these risks and strict lender requirements.” If you own in one of those subclasses, start the renewal earlier and expect a shorter list of quotes.
Then why do people say the market is soft?
Because the property half genuinely is, and the property half is usually the bigger premium line.
Lockton reports that habitational property capacity “remains abundant” and that multifamily assets, particularly in catastrophe-prone locations, are receiving rate cuts. Specifically: on wood frame or superior construction with improvements, ground-up property rates are down 5% to 15% at renewal, with reductions of 20% to 30% available on shared and layered placements.
So a Texas apartment owner can have both experiences at once: a double-digit property reduction and a double-digit liability increase, netting to roughly flat, while the trade press reports a soft market. The right question at renewal is not “did my premium go down.” It is “which half moved, and why.”
What does Texas add to this?
Hail. Lockton identifies severe convective storms as the top natural catastrophe loss driver for insurers over the past decade and notes that severe convective storm activity has “tempered property insurers’ appetites for real estate risks in some states, such as Texas and Colorado.”
That shows up in your program as a percentage wind and hail deductible rather than a flat one — which is the number to negotiate before you negotiate rate. A 2% deductible on a $20 million schedule is $400,000 retained before coverage responds.
One clarification for inland owners: TWIA, the windstorm association created under Texas Insurance Code Chapter 2210, writes wind and hail coverage in designated coastal counties. Properties in Guadalupe, Comal, and the surrounding counties are outside that system entirely. Your hail exposure runs through the standard or surplus lines market.
What will my lender require?
If the asset carries agency debt, the loan documents drive the program. Lockton notes that habitational lenders backed by Fannie Mae and Freddie Mac “typically require SML coverage and self-insured retentions of no more than $25,000 in low-income housing programs.”
Beyond that, the requirements that most often cause a closing delay are consistent: replacement cost valuation with agreed amount or a coinsurance waiver, business income or rental value for a stated number of months, ordinance or law coverage on older buildings, a cap on the named-storm or wind/hail deductible percentage, and the lender named correctly as mortgagee and loss payee. Pull the insurance exhibit out of the loan agreement and give it to your broker before marketing starts. Those terms are negotiable with the market and not negotiable with the lender, which is the reverse of how most owners sequence it.
How do you get a habitational account placed well?
The submission does most of the work.
- Property narrative. Roof replacement dates with documentation, electrical and plumbing updates, HVAC age, water-mitigation devices and leak sensors, and how your maintenance ticketing system works with actual response times.
- Security narrative. Lighting audits, controlled access, camera coverage and retention period, courtesy patrol, and any crime-score context you can supply. Since liability is the line that is rising, this is where evidence converts into premium.
- Loss runs with explanations. Five years, with a written account of what changed after any significant claim. Water losses in particular should be answered with a mitigation program, because underwriters read them as deferred maintenance signals.
- Habitability documentation. Written repair-response standards and records that show they are met. This is the direct counter to a habitability exclusion.
- Quote both structures. The published spread between ground-up and shared and layered placements is large enough that any owner with meaningful total insurable value should see both.
- Start 90 to 120 days out. Shorter markets need more time, not less.
A closing caution on numbers: national loss statistics you may see quoted — including the widely used Insurance Information Institute homeowners data — explicitly exclude Texas and describe owner-occupied homes rather than multifamily. Habitational risk in Texas does not resemble either benchmark. Be skeptical of any per-unit figure that will not say where it came from.
If you own multifamily in Central Texas and your renewal came back flat, it is worth finding out whether that is a good outcome hiding a bad one. Send us your declarations pages, loss runs, and lender insurance exhibit, and we will show you which half of the program is moving and what would change it. Our commercial specialties group places these accounts, and our risk management team builds the documentation that makes the liability side quotable.
Related reading: How Much Does Apartment Building Insurance Cost in Texas?
