The Department of Housing and Urban Development has revised its policies, allowing insurance for multifamily properties financed through Federal Housing Administration-backed mortgages to have higher deductibles.

Starting now, HUD will allow a wind or named storm insurance deductible to be as much as the greater of $50K or 5% of the insurable value per property, with a cap of $475K per event.

Previously, deductibles could be the greater of $50K or 1% of a property's insurable value, with a cap of $250K.

“Raising the deductible amount provides important flexibility for lenders and property owners to obtain and maintain appropriate property insurance that covers their properties in the event of catastrophic weather damage,” Ethan Handelman, deputy assistant secretary for multifamily housing at HUD, said in a statement.

Since policies with higher deductibles tend to be less expensive, the move could reduce insurance costs for many multifamily owners. Insurance has contributed to the increasing cost of apartments, especially in areas where natural disasters are more common.

Overall expenses per unit in the multifamily sector rose 7.1% annually in January, Yardi Matrix reports. The increase was led by property insurance, which was up 27.7% year-over-year and has ballooned 129% since 2018.

Insurance costs have risen significantly in most parts of the country, Yardi Matrix notes, but the surge has been particularly pronounced in the Southeast and other places suffering from a growing number of weather-related damages.

There were 28 weather and climate disasters nationwide causing at least $1B in damages each in 2023, more than the previous record of 22 such events in 2020, according to the National Oceanic and Atmospheric Administration. The total in damages for the 2023 events were at least $92.9B.