Homeowners Associations (HOAs) can sometimes face issues with increasing insurance costs. There are several factors that may contribute to this problem:
- Claims history: If a homeowners association has a high number of insurance claims or large claims payouts, insurance companies may increase premiums to compensate for the perceived higher risk.
- Location: The area where the HOA is located can affect insurance costs. Higher-risk areas, such as regions prone to natural disasters or with high crime rates, may result in higher insurance premiums.
- Building materials and features: The construction type, age of the buildings, and specific features within the community can impact insurance costs. Buildings with outdated infrastructure or with certain hazards may lead to higher premiums.
- Underinsurance: If an HOA's insurance coverage is not sufficient to adequately protect the community's assets, insurance companies may increase premiums to mitigate potential losses.
- Market trends: Insurance industry trends and regulations can also influence rates. For example, in areas where insurance companies face increased costs or regulatory changes, they may pass on those costs to policyholders.
To address these issues, HOAs can take several steps:
- Evaluate current coverage: Regularly review the association's insurance coverage to ensure it is appropriate and adequate. Work with an insurance professional who specializes in HOA insurance to determine the coverage needs of the community.
- Risk management: Implement risk management strategies such as maintaining common areas properly, conducting regular inspections, and implementing safety measures to minimize claims and reduce insurance costs in the long run.
- Shop around: HOAs can periodically evaluate insurance providers and obtain quotes from multiple carriers to ensure they are getting the best rates and coverage for their particular needs.
- Increase deductibles: Raising deductibles can sometimes lead to lower insurance premiums. However, this should be carefully considered as it could result in higher out-of-pocket costs for the association in the event of a claim.
- Seek professional advice: It may be beneficial to consult with insurance brokers or attorneys who specialize in community association insurance to navigate potential solutions and negotiate better rates.
Remember, each homeowners association is unique, and the specific reasons and solutions for increased insurance costs may vary. It's essential for HOA board members and homeowners to work together and explore potential options to address insurance issues effectively.
Author, blogger and Consultant
1 年Association boards can take two more actions. First, insurance is controlled by the state where the association is located. They can complain to their state commissioner. This may not achieve the desired results since the commissioner is an appointed official. Their next step should be to contact the state representative of the district they are located in. The one area associations overlook is the political clout they have from the number of owners/voters they represent. At the local level, state districts are usually small by comparison, and just a few votes often decide elections. Your association represents a large block of voters in this small pond, often in the hundreds. If you complain to your state representative, you will not be ignored. They can reach into the state bureaucracy for you to get results. Second, associations' other option is to form state and national-level organizations that represent their interests. A state organization of associations will have even more clout over how insurance is regulated than just one homeowner association. This is a more daunting task because these organizations do not currently exist.