Two business people talking about association insuranceAs a board member, you understand the importance of protecting your property and maintaining its value. One critical component of this protection is insurance coverage. Condo and community association insurance is designed to cover claims or losses that can impact your community, from property damage and liability claims to natural disasters and other unexpected events.

Obtaining and maintaining insurance coverage for condo and community associations has become increasingly complex in recent years. Rising premiums mean many associations need help finding affordable, comprehensive coverage that meets their community’s needs.

FirstService Residential understand these challenges and we strive to provide expert guidance to help our communities protect their properties and manage risk effectively – from information on insurance policies and coverage options to resources for navigating complex regulations and compliance issues, we are dedicated to helping community associations thrive in today's uncertain insurance landscape.

Keep reading to learn what you should know about how to navigate the insurance market to get the best coverage for your association.

State of the insurance market

Over the past year, Georgia has seen an increase in insurance rates. One factor behind this is increased inflation, which has led to higher construction and replacement costs. As a result, underwriters require higher property valuations when writing or renewing coverage. Commercial property insurers have also experienced unpredictably high loss costs – the cost needed to pay for claims. These losses have been attributed to more frequent catastrophic weather events, a broken supply chain impacting the cost of construction materials like lumber and steel, and labor shortages in the construction and transportation sectors. To compensate, insurers have passed these costs on to organizations in the form of higher premiums.

“The insurance market is in a crisis today,” said Armando Garza, director of insurance for FirstService Financial.  “Before 2017, we were in a soft market,” a term that describes a marketplace with large insurance carrier capacity and low insurance premiums. Competition among insurers was high, and premiums were underpriced to attract new policyholders. During the soft market, insurance policies were more accessible. But after 2017, when Hurricane Irma hit the Southern U.S., the global market began to experience an uptick in insurance rates. “So even though your property is in an area that didn’t experience a storm or major incident, there would be an impact on your insurance rates,” he said.

So, given the insurance market volatility today, what can your board do to get the best rates for your association?

Here are 4 tips to help you get the best coverage at the best available premiums.

Tip #1. Be aware of insurance coverage changes and requirements

Insurance carriers are more selective than ever when it comes to the risks they are willing to cover. Some have begun requiring a pre-inspection of a property or requesting reports from engineers or licensed professionals before releasing a quote. Other carriers have added separate wind and hail damage deductibles to policies that did not have them before. Coverage for earthquakes has been reduced or excluded. Because earthquakes occur in Georgia and can cause significant damage, your board should be aware of policy changes and determine if your association’s coverage should be increased.

Under The Georgia Condo Act, associations are required to carry basic perils or fire and extended coverage. It does not legally require the association to have insurance covering water damage, such as pipe bursts, washing machine overflows, or similar events. Unit owners should review their policies with their insurance agents to ensure they have adequate coverage.

“By proactively educating yourself on the latest updates, you can ensure your association avoids unwanted surprises and potential pitfalls, said Danny Ellis, president at FirstService Residential.

Learn more about how to manage rising insurance costs. Read: Budgeting For Success: Managing the Rising Costs of Supplies, Labor and Insurance

Tip #2. Make sure your property appraisal is up to date

If your association has an appraisal due, start the process as soon as possible.

“It’s really important for boards to be proactive,” said Garza. "We recommend that boards begin working with their insurance agent at least 150 days before renewal. Insurers are stringent and need time to review the required data carefully."

To prepare for submission, boards should gather their property's loss history data and share accurate information about the condition of their property, including all improvements and repairs. “Sharing inaccurate or incomplete information leads the carrier to make assumptions about your property's condition which could prevent you from getting the most competitive rate,” Garza added.   

“Sit down with your agent and communicate with them. Their job is to work with boards, help them prepare and know what to expect,” Garza said.

Your professional management company should support you during the entire process, working together with your board to ensure you understand the appraisal process and requirements.  

Tip #3. Choose the right broker

Selecting the right property insurance broker is critical for any property management team. The insurance broker links the association and the insurers, making it crucial for your board to find a broker who provides reliable and comprehensive coverage options. The right professional management company will help your board navigate the process.

“FirstService Financial, our in-house team of financial experts, has in-depth experience and understanding of insurance fundamentals,” said Ellis. “They work with the communities we serve and their management teams to ensure all options are explored and the best process is followed.”

Tip #4. Maintain the physical condition of your property

Well-maintained properties are less risky and pose fewer coverage needs than poorly maintained properties, which pose a higher risk, increasing the likelihood of damage and liability claims. Taking proper care and keeping your property in good condition shows less risk and the probability of claims, which translates to lower insurance premiums.

Insurance carriers have increased their requests to review documents showing properly maintained properties in Georgia. Many carriers want structural reports from an engineer. This report provides much more detail about the structure's integrity than a reserve study. Though Georgia does not require a reconstruction appraisal, many carriers request one before quoting a property. Appraisals are the best way for a Board and the insurer to determine the most accurate value and ensure adequate insurance protection. Without an appraisal, the carrier determines the building value on which the premium is calculated.    

Getting the right coverage at a competitive rate for your condo or community association may be a challenge in this current market, but it is doable. Contact FirstService Financial for support with your property insurance needs.

Friday April 28, 2023