Insurance costs for homeowner associations keep climbing. In addition, many insurance companies are also adding exclusions and forcing HOAs to take greater risks by accepting higher deductibles to offset the premium increases. Claims due to extreme weather are part of the reason behind the skyrocketing premiums. While East Tennessee is spared much extreme weather, claims throughout the nation still can affect our insurance marketplace. Here are some strategies to help your Board to balance HOA risk with premium increases.
Review your deductible: A higher deductible usually saves money on premiums. However, it’s important to balance any increase in your deductible with a budget line item to ensure that the association can pay the deductible in the event of a loss. If your HOA has sufficient funds for small losses, a higher deductible could make sense. However, it’s not always the best answer for everyone. If your budget is already stretched too far, increasing your deductible could be too much risk for your association.
Shop insurance companies: Insurance companies subject themselves to different risk and claims, so comparison shopping has the potential to save money for your HOA. Stick with an agent who is experienced in dealing with homeowner and condominium associations and read the fine print before making a switch. It’s always good to compare, but there’s a potential pitfall. Saving money on premiums isn’t worth it if the insurance coverage reduces coverage or has a history of denying claims. Do your homework before you switch.
Check your coverage: Insurance coverage that was needed ten years ago may not be necessary today. Likewise, the replacement value that your insurer estimated may not be accurate today. Reviewing each type of coverage and the cost to rebuild your property could lower your premiums. Conduct an insurance checkup with your agent to discuss your coverage details and possible options for lowering your premiums. Even if you choose not to lower the premium, your HOA Board will have a better understanding of your coverage.
Check your governing documents: Some associations go beyond the requirements of their governing documents. Understand what your governing documents specify, and review your policy for areas of duplicate coverage. Eliminating duplicate coverage can offer a significant savings. Communicate any changes to all homeowners before you take action to ensure that you don’t create a gap in coverage that puts residents or the HOA at risk.