Things to Consider for HOA Insurance
Is your HOA Insurance in compliance?
Check your State laws. Do you have minimum State-mandated insurance requirements? If so, are you in compliance? Check your governing documents. Does your current insurance check all the boxes? What about Fannie Mae and Freddie Mac? A lot of lenders require certain coverage and limits. Being out of compliance could limit the number of lenders willing to write loans to Units within your HOA. This could have a drastic effect on home values.
When was the last time your governing documents were updated?
Do you know who is responsible for what with regards to building coverage on the interior of the unit? HOA or Unit Owner? Do you know how your current insurance policy will respond to interior unit coverage? It is better to answer these questions now than find out at the time of loss that you had the wrong coverage.
How much is your HOA worth?
You would be surprised, this is tougher to answer than it may appear. I’ve said this for years, “You can’t go to the Condo Store and buy a new HOA.” The simple answer is to rebuild costs as much as the contractor charges. Those of you that have gone through losses, remodels or roof replacements know that this number varies greatly from contractor to contractor. Insurance Brokers and Carriers use valuation software like Marshall Swift through CoreLogic. These programs calculate price based on materials and labor in a given zip code. It is a great place to start but should not be the only means of valuation. Boards and Community Managers should look at these valuations from time to time and cross-reference them with information from their contractors. Do the contractors agree? Do they recommend more or less? Why? Asking the questions upfront, as tough as they may be, is better than finding out you don’t have enough coverage in a catastrophe.
Side note – Guaranteed Replacement Cost (GRC) is a great option when available. However please read the fine print. Many endorsements require you to be insured to value at the time of loss otherwise GRC does not apply. We have seen brokers purposely lower values to save premium and add on the GRC endorsement thinking convincing their clients it is a great policy. While you might be saving a little premium on the front end are you willing to risk full coverage at the time of loss?
Have you made any recent changes to your HOA?
Certain things could have a big effect on coverage and price. You may have recently contracted with a security company to patrol your HOA. Or maybe you recently voted to increase the amount of units that can be rented. It is best to engage with your insurance professional during initial discussions so we can give you input to help you with your decision.
Are you keeping up with the maintenance schedule in your reserve study?
Insurance carriers like to see that associations are well maintained and have a plan in place to replace failing components. Often time premiums are lower when we can place coverage with carriers who require maintenance to be up to date.
How many HOAs does your current insurance broker service?
HOA insurance is extremely nuanced. Make sure you partner with a professional who knows what they are doing. We see so many “Generalist” insurance brokers that have a few one-off and have no idea how to insure them. Make sure they either specialize in Community Associations or at the very least have a healthy amount in their book of business.