When you need to file an insurance claim on your multifamily property, the benefits you receive will only be as good as the policy you purchased. While maintaining low monthly premiums might seem like the smartest business decision to protect your bottom line, the reality is, it could wind up costing you big in the long run.

Does your policy have adequate coverage for unexpected issues, or will you be stuck paying out of pocket in penalties, repairs or mandated upgrades? Here are five policy endorsements to consider to secure the future of your property and your investment.

1. Coinsurance

Coinsurance is a clause requiring policyholders to carry a sufficient dollar amount of insurance that is 80, 90 or 100 percent of the construction value of the property. If the ratio of your insurance limit to your property value isn’t adequate, prepare to be penalized. On a commercial property, a $2k mistake on your premium could mean getting hit with a $10k-$100k penalty on a future claim.

To avoid a coinsurance penalty, you need to determine exactly what it would cost to reconstruct the building if it were torn down to the slab and confirm the property is insured to that value. Foundations, underground plumbing and site work are typically not covered, but the cost to frame the building; install siding, windows and doors; complete all mechanical, electrical, plumbing and roofing work and perform the interior finish-out are all subject to valuation.

Knowing this specific valuation amount is critical. If you were to purchase a $500k property and insure it for that amount, but your insurance company finds it actually costs $1mil to reconstruct, you could be faced with a 50-percent penalty when you make a claim, depending on the percentage requirement stipulated in the policy. You might consider an “agreed-value” policy, in which you and your insurance company agree upon a value upfront. While these are typically more expensive, you will be guaranteed to receive the full restoration costs when you experience a loss.

2. Code Upgrades

Multifamily properties are most likely to require code upgrades in the event of a fire, and one of the biggest problem areas is electrical — especially for older buildings. If your property experiences fire damage and requires repair and reconstruction, all of the electrical work in those affected areas will need to be brought up to current standards of the National Electrical Code (NEC), from hard-wired smoke detectors to ensuring sufficient ampage.

If you have standard, out-of-the box insurance coverage, a typical code-upgrade endorsement only allots $10k for the increased cost of bringing your buildings up to code. However, an electrical code upgrade alone can cost far in excess of this amount, not to mention other necessary considerations such as energy-code upgrades, the installation of fire suppression systems and more.

Property owners are required by law to complete these upgrades as part of a repair — but if your code-upgrade coverage isn’t sufficient, you will be responsible for the cost. The older the property, the more coverage you’ll need, so review your policy to ensure it’s adequate for the age of your buildings.

3. Asbestos Mitigation

Multifamily structures built before 1975 will potentially have asbestos-containing materials (ACM). This only becomes an issue when a building is damaged in a fire or a storm, in which case you will need to properly remove the hazardous material. But you can’t just send any crew in to rip out and dispose of asbestos — it needs to be handled by a licensed abatement contractor.

The problem is, most insurance policies either don’t cover asbestos, feature very limited coverage or they have an “absolute asbestos exclusion” stating the policy doesn’t apply to any damage, loss or costs related to asbestos, including mobilizing an abatement company. If you have several affected units, you could potentially find yourself out $50k in expenses to properly abate the asbestos, which includes safely containing the affected area, demolishing it and bringing it down to the studs, removing and bagging the debris, and properly disposing of the ACM.

While insurance companies are naturally reluctant to offer this coverage because it’s a known risk, as a property owner, you have the option for this additional coverage. It’s just a matter of how much you want to spend to have that coverage available, so consider the age of your property and weigh your options carefully.

4. Cosmetic Damage Exclusion

A common cause of disputed claims, cosmetic damage exclusions exclude coverage for damages that only affect the appearance of a structure, not the function. If your metal roof is damaged in a hail storm, you would need to prove the damage jeopardizes the integrity of the structure, not just your aesthetic sensibilities, in order to receive an insurance payment for that repair.

Evaluating what kind of damage you actually have requires fairly meticulous expert analysis following ASTM standards, so start with hiring a reputable public adjuster to coordinate your team of experts for you.At a minimum, you’ll need  to enlist the help of a forensic engineer and a metallurgist, who will take samples from the property and deliver the samples to a laboratory for destructive testing, while maintaining and documenting the proper chain of custody. Proving chain of custody could make or break your cosmetic-damage dispute, so it’s vital to ensure everyone involved is carefully following best practices.

5. Actual Cash Value Roof Endorsement

Often located in the same policy endorsement as the cosmetic exclusion, actual cash value (ACV) is the cost to replace a damaged roof, minus current depreciation. For example, if you experience wind damage on a 30-year rated roof that has been on a building for 15 years, the insurance company may apply a 50-percent depreciation factor to your reimbursement. This means you would receive a significantly reduced amount versus what it will actually cost to replace the roof.

While this is traditionally a mandatory endorsement based on the insurer’s underwriting, you may choose a replacement-cost product to ensure you receive the full cost of repair or replacement in the event of loss or damage. (You would only receive ACV until the work is completed, and then apply for your replacement-cost benefit.) Or, if you have recently replaced a roof on your property, you can circumvent the endorsement by documenting the age of your roof to prove it was replaced.

Every multifamily property is different and will have specific considerations based on age, location, size and budget. Assess your property and review your policy with these five considerations in mind. Are there gaps in your coverage that could use addressing? By securing the right amount of coverage for your property upfront, with the right endorsements, you can be confident your investment will be returned when you need it most.