Ask the Expert: Common Homeowner Association Insurance Questions

Most owner associations are aware that insurance plays a vital role in the protection and safety of both homeowners and board members, but it can be a complicated topic when it comes to including coverages and costs into your budget planning. Watch the video to get answers to your common insurance questions, including:

• Common Insurance Questions
• Why Rates are Rising & Anticipated Increases
• Best Practices for Renewal

Get answers on what boards should consider about insurance:

What is the current state of the insurance market?

It's hardening. The overall insurance market is global, and is therefore impacted by global events.  Recent years have seen multiple natural disasters resulting in massive loss claims, including incidents like hurricanes Harvey and Irma, as well as wildfires not only in the Pacific Northwest but also in Austrailia. According to the Insurance Information Institute, 2017 and 2018 are included in the Top 5 Worst Years for claims paid by carriers.These events have caused insurance carriers to increase rates, tighten requirements for or remove entirely some forms of insurance, and narrow renewal windows for the 2021 cycle. Simply put, insurance is costing more and covering less than in previous years.

What does FirstService Financial Insurance do? How can they help condo & homeowner associations? 

FirstService Financial partners with insurance carriers and fully-licensed HOA & COA insurance brokers for preferred rates, and also provides proprietary insurance products (policies) that are only available to FirstService Residential managed clients. These partner relationships and unique products allow FirstService Financial to offer best-in-class costs and expanded coverages from expert brokers that are knowledgeable about the specific needs of both the homeowners association and condominium owners association space.

How do we know if we have an experienced broker?

Any insurance broker can give a quote to an association, but HOA & COA insurance requires specialized knowledge that must be in compliance with not only state laws and regulations, but also your own governing documents or CC&Rs (Covenants, conditions, and restrictions).  Depending on your property type, there may be specialized policies to be considered like wind damage riders for high-rise buildings. Your board should consider and be covered for not only General property and liability, but also policies like Directors & Officers insurance and Workers Compensation coverage.  A broker who doesn't specialize in the HOA or COA insurance space may not be able to fully insure your association properly.  Make sure to ask your broker if they have experience in providing insurance to hoemowners or condominium owners associations and if they have examined your governing documents. Ask for references from other associations that they cover. Be wary if your broker doesn't ask for at least 5 years of your property's loss claim history.

When should condo or homeowner association boards typically start thinking about renewing insurance?

As a best practice, FirstService Financial recommends that an association board begin to assess insurance needs 90-120 days (or 3-4 months) before your insurance renewal date.  There are several reasons to begin earlier than you might think. First, your association may need time to obtain your loss runs from brokers and carriers who may inundated with requests from other associations during the busy renewal season.  Secondly, a current carrier will want to see a five-year loss history.  This may be more difficult to obtain if you have had more than one provider during that time period. Note that any loss runs submitted to a carrier for a quote must be dated within the 90-day window prior to renewal to be considered valid. Third, you should make sure that your board or designated committee has enough time to get quotes from multiple carriers or brokers, as may be required by "due diligence" stipulated in your governing documents. Last but not least, your homeowner or condominium association board may need to have time to schedule additional meetings to discuss received insurance quotes and make a timely decision before the renewal window has passed, or consider the scheduling of an annual meeting if your governing documents require a vote by the membership. 

What are the projected rates of insurance for 2021?

As of August 2020, and given the current status of the hardening insurance market, projections for 2021 appear to increase current rates anywhere from 15-30% for associations with clean loss histories.  For associations that may have had claims in the past 5 years, these rates could be pushed even higher depending on the severity of the claim.  Note that the insurance market is ever-evolving and projected rates may change. However, it is the general consensus among carriers and providers that the rates are expected to increase rather than decrease for 2021.   

FirstService Residential Ask the Expert webinar miniseries aims to answer the most frequently asked questions of associations throughout Texas on a variety of key topics. Learn more about FirstService Financial and how they help your association get better coverage at lower rates.