Inflation- we’ve all noticed the strain on our finances over the past few years with the costs of seemingly everything going up. I’m sure you’ve noticed insurance is no different, so here are some tips for planning for your insurance for the upcoming budgeting year.
- Is the association’s building coverage adequate to rebuild? Have your agent or carrier loss control reevaluate the association’s building values.If the built in inflation guard on the policy hasn’t kept pace with the rising costs of building materials then the buildings could be vastly underinsured. Which means in the event of a catastrophic loss, the association may not have adequate coverage to rebuild.
- Budget for 12-16% increase. While this varies by carrier, 8-10% of this increases we are seeing this year is due to the building coverage increase and the remainder is rate increases. This is assuming no claims, if there have been claims since the previous renewal it is possible the budgeted percentages mentioned previously could double.
- Review Deductible Options-This has certainly been a hot topic for many associations with the incurred wind/hail losses this year.There are some carriers which mandate a % wind/hail deductible per building which in the event of a widespread loss can result in significant out of pocket retained costs by the association. There are still a few carriers which offer a flat deductible for wind/hail-this is an important question to ask your agent. This same flat deductible would apply in the event of other covered losses. Increasing this deductible is another option in offsetting the rate increases. If our clients are already with a carrier offering the flat deductible for all perils and we don’t want to disrupt this coverage, we will automatically offer the higher deductible options. This can significantly reduce the increases in rate. Then in the event of a loss, an assessment could be done and the unit-owners could file a claim under their condo policy under the coverage of Loss Assessment.
- Unit owners should check the amount of their loss assessment-In the above-mentioned scenario if the board does assess, the unit-owner could then make a claim under their policy. Many condo owner policies will include a limited amount of coverage, perhaps $1,000. A higher coverage amount is recommended and typically, increasing coverage to $10,000- $50,000 is a minimal additional premium. One of our carriers only increased the premium by $1 annually to increase this coverage from $10,000 to $30,000. We suggest every unit owner contact their agent in increase this coverage.
- Confirm your board is protected by broad Directors & Officers coverage.Not all D&O liability is created equal. If D&O is just an added endorsement to your property and liability policy, then there is a good chance that the exclusions are greater than what it covers. Look to obtain the broader protection that a stand-alone D&O through a specialized carrier can offer the board. In addition to D&O, Fidelity and Cyber are additional coverages to discuss with your agent.
- Consider excess liability for your association.Sadly, it is a litigious society that we live in which means that the $1 million limits on your package policy may simply not be adequate. Often the association can obtain a $5million excess policy for little more than a $1million.
- Review coverages for entryways, fencing, incidental outbuildings and pool for both Homeowner and Condo associations.There could be some built in coverages but often it is not adequate to replace.
- Confer with your agent on flood insurance- we are seeing some re-mapping by FEMA which may change your association need for flood insurance.Typical flood policy will have building coverage for an association but can add contents for association if needed. Rate varies on location in relation to flood plain and elevation.
- Discuss with your agent their plan for advocating for your association for the upcoming renewal. Do they negotiate your renewal with the underwriter? If your association has made improvements, taken steps to minimize future losses and been loss free speak to your agent about asking for credits to your renewal or discuss the underwriter backing off the rate increases we discussed.
- Engage in risk management practices to mitigate potential risks- One of the primary risk management measures for condominium associations is obtaining appropriate insurance coverage.Other key areas of risk management that condominium associations should focus on are regular maintenance and inspections, legal compliance, emergency preparedness, financial management, contract management, communication and education, legal and professional advice.
As you can tell from this top ten list having a trusted insurance advisor is crucial in helping your association in planning for your insurance for your upcoming budget year. McDaniel Insurance will work hard for your homeowner or condominium association to secure the coverage needed at the best value. Call 502.909.0920 or email Deanna@McDanielins.com