How to Secure the Best Insurance Coverage for Your Community
As a community association board member, the countless hours you volunteer go toward assisting with a very important objective – creating a safe and vibrant community. In many cases, this means assessing your association’s insurance policies to guarantee that your community is fully covered, appropriately insured and receiving the best value for the cost.
“Insurance is about more than protection from loss,” said Sean Kent, CPCU – vice president of FS Insurance Brokers, a licensed insurance brokerage and affiliate of FirstService Residential. “It’s a significant line item within your budget, so identifying the greatest coverage at the lowest cost can grant you funds that can be allocated elsewhere – or better yet, saved. Moreover, the right coverage will protect you from unexpected and unpleasant surprises in the event of a loss.”
Strict attention to your association’s insurance coverage pays – quite literally. With the right mix, you’ll save money and enjoy the peace of mind that comes with having the coverage you need when you need it. Here are a few areas that you should consider when thinking about your community’s insurance.
1. Start with an insurance review.Much like your reserve study, your insurance policies require ongoing reviews to make sure that you have the right coverage at the best price – especially since these prices fluctuate from year-to-year. It helps if you’ve built a relationship with a reliable insurance professional, which best happens with the assistance of a national property management company which has the buying leverage to help you save on your premiums and get the maximum coverage. In fact, FirstService Residential has an affiliated arm – FirstService Financial – that specializes in banking and insurance products.
2. Know that this is a highly specialized area.Many insurance professionals lack the necessary expertise in providing policies for associations. It’s a part of the business unlike any other insurance market, with specific coverage options for assets unique to associations (landscaping is one notable example). Make sure you look for an insurance professional with experience in this area. If they do have experience, inquire about the number of communities they serve in this capacity. It’s also recommended to look for a broker with the Community Insurance and Risk Management Specialist (CIRMS) designation, which is provided by the trade group Community Associations Institute (CAI).
3. Remember that the process is unique, too.For those who aren’t in the insurance business, the process of procuring the right policy mix can seem daunting. Most notably, it can be time consuming – taking anywhere from 90 to 120 days. It begins with the bidding process. Carriers are only able to entertain one request for a bid at a time, so only one broker can access them in the beginning. If you want multiple agents involved, you’ll have to assign a carrier to each agent. This can get very confusing, which is where an experienced property management company can help.
4. Make sure the coverage is right for your association.It takes a unique combination of coverage to fully protect your association and its residents. Typically, this begins with a liability policy, or what’s sometimes known as an umbrella policy, which covers third-party claims based on bodily harm or property damage. This coverage goes beyond what’s included in your standard property insurance. While property insurance covers the community’s tangible assets, such as residential buildings and their common areas, it’s important to understand that property insurance and liability insurance are two different things.
5. Understand your liability policy.Your liability policy should include directors and officers as a way to protect your board and community manager from legal damages (called a Directors & Officers Liability Policy or D&O). This policy should include third-party discrimination coverage for occurrences of abuse, slander and wrongful termination. While most liability policies are “occurrence based” – meaning you’re covered so long as the event occurred while the policy was in force – D&O policies are “claims based.” This means it doesn’t matter at what point in time the event happened. Instead, coverage is based on when you report the claim. So if you sit on a claim and submit it after your coverage has expired, you’ll be left in the lurch – even if the event occurred while your policy was in force. Avoid this pitfall by making claims right away. You can even go as far as alerting your insurance company as soon as someone makes a statement about suing you, even if said suit hasn’t been officially filed yet.
6. Consider any unforeseen losses.As a final facet of your policy mix, make sure to invest in workers’ compensation, which not only protects your association’s staff, but also covers you if a hired contractor gets injured on the job, and fidelity insurance, which covers losses due to theft. Some associations forego these policies, only to regret it later. Even if you don’t have payroll, or if you consider theft an unlikely probability, procuring these policies is a smart move as they can help manage risks and protect your community from legal exposure.
7. Take the age of your building into account.
Let’s say there’s damage to your building in a fire or flood. Your property insurance will cover the cost of the repairs you need, right?
Not always. Your policy will only pay for rebuilding to original standards. If your structures were made before current building codes, then you’ll experience a serious shortfall – effectively, your policy won’t cover repairs or reconstruction up to code. The cost to build to current codes is almost always greater than reconstruction to old standards. To cover this gap, you’ll need Building Ordinance & Law Coverage, Parts A, B & C.
- Part A allows a partial loss to be treated as a total loss, so if your local building ordinances require a rebuild to certain codes, then your gap is covered.
- Part B covers the demolition costs associated with razing a structure that has been partially damaged, but must be rebuilt under the provisions of Part A.
- Part C bridges the gaps of increased costs of construction in instances when building codes have changed and more expensive fixes are necessary.
8. Keep looking for ways to save.Just because you’ve found the right policy, it’s not time to rest on your laurels. Insurance, like maintenance and other association responsibilities, should be under continual review. It’s the only way to identify potential savings and gaps in coverage. Your property management company will also be aware of new products that can benefit your association. What’s more, you can identify ways to reduce risk, which translates to savings on your coverage down the line.
Saving money and staying protected – those are the real benefits of taking a proactive approach to insurance coverage. For more information on how a community association management company can help your community, fill out the form .