There are fewer insurance companies willing to write policies for HOAs due to perceived risk. In the events that have taken place in 2022, such as floods and fires, there is a massive deficit in insurance for HOAs. Community association insurance plays a significant role in budgeting for HOAs. Insurance premiums are a necessary expense that HOAs must include in their budget to ensure that the community is protected.
Once there is a demand from an insurance policy owner, whether it’s monetary or non-monetary, the policy has a duty to defend you. However, legal defense rates are skyrocketing, not to mention construction costs. The value of properties is heavily influenced by the cost of materials and reconstruction in compliance with code regulations. Despite the rise in costs, Insurance companies have a duty to insure you to value. So, how can you make your community more attractive to insurance companies? Here are a few tips:
Implement Risk Management
To differentiate your application in the competitive market of this industry, it is critical to communicate and document the measures taken by the community and board of directors to mitigate risks. For example, if water damage has been an issue, it’s essential to verify whether the general manager, on-site engineer, and staff are aware and have endorsed a water emergency response plan. If you have installed water leak detectors, make sure you include that and convey that message of safety to the broker. Additionally, it’s essential to determine the frequency of training and updating plans. It is crucial that your broker partner communicates the necessary risk mitigation measures to the underwriting community, regardless of the type of risk involved- the details matter. All in all, insurance companies are interested in minimizing risk and avoiding claims, so implementing effective and thorough risk management strategies can be a key factor in attracting insurance companies.
Maintain Accurate and Up-to-Date Records
The last thing that general managers and board members want to do is answer lengthy questions and fill out applications. Still, in order to become a priority for insurance companies, they want to see detailed documentation that is up-to-date and accurate. When members of the board and community make significant investments to minimize risk, property insurers are pleased and encouraged by the community’s dedication to mitigating those risks and providing documentation of the steps they took to protect their property. This documentation can be vital when it comes to submitting claims and can help speed up the process of receiving compensation. Property insurers and communities both benefit from this, and it can contribute to a positive and cooperative relationship. This type of partnership decreases the likelihood of paying out claims, which can lead to lower rates for both parties. Building goodwill is a bonus to this mutually beneficial arrangement.
Work with Experienced Insurance Brokers
When it comes to understanding insurance for community living, there is a limited number of insurers that specialize in the field. Any broker that specializes in this industry knows where to go and understands the limited marketplace. It’s important to find an insurer with experience working with your specific type of community living. For example, if you’re part of a co-housing community, you’ll want to find an insurer that has experience with co-housing arrangements and commercial risk. You’ll also need to ask about the specific types of coverage that are available. Depending on your community living situation, you may need coverage for things like common area property, liability, and individual belongings. You may also need insurance for fraud, director and officer liability, and workers’ compensation. When working with a broker, be sure to ask about any potential discounts that may be available. For example, some insurers offer discounts for communities with good safety records or those implementing specific risk management strategies. Finally, be sure to review your policy regularly to ensure that it still meets your needs. As your community evolves, your insurance needs may change as well.
The shortage of insurance for HOAs has created a challenging environment for community associations. However, by implementing effective risk management strategies, maintaining accurate and up-to-date records, and working with experienced insurance brokers, communities can make themselves more attractive to insurers. By doing so, communities can establish mutually beneficial relationships with insurers, which can lead to lower rates, faster claims processing, and increased protection for community members’ investments. While it may take time and effort to implement these strategies, the benefits of doing so can make a significant difference in the long run.
