Condo Association Insurance and Hurricane Risk

You as the condo owner of a condo association property need to be aware that hurricanes are a real threat. You also need to be aware that besides the Gulf Coast, Florida, Texas, North Carolina and South Carolina, the entire east coast of the United States can be devastated as well.

Hurricanes are one of the deadliest and destructive forces of nature. Billions of dollars each year are spent on damage to HOAs and Condo Associations, as well as, individual condo units. For those who don’t know what a hurricane is, it is a cyclonic force, similar to a tornado that forms in warm waters in the Atlantic Ocean. Hurricane force winds can reach over 165 miles per hour. What causes the damage? Hurricanes will bring high winds to lead off the parade. Then, as the wall of the storm, which is entirely comprised of swirling water, makes it way toward land, it creates an effect called wave wash. This is an effect where harmonic walls of water increase in size with each wave. The end result is a wall of water the height of a two story building.

Now, I want to show you what the real effects of hurricane damage can be to your condominium association or condo unit. These are real condo insurance cost statistics for the 10 most destructive hurricanes over the past 20 years in order of damage:

One interesting observation about the data is that the majority of the larger storms happened within a year of each other. Also, those storms in the 2004-2005 year, except Katrina, hit Florida. The problem from that amount of storms in such a short time is simply that Florida condo associations didn’t have time to dry out between them. This made it difficult to determine what properties were damaged in which storm. Adjusting claims became a “best guess” situation.

Another observation is that Hurricane Floyd caused damage not only in the Carolinas, but also as far north as Brewster, New York. That is a damage path of over 750 miles.

Then, there was Katrina. The interesting fact about Katrina is that wind damage was minimal in Louisiana. What caused the destruction of the levees was wave wash! Water, not wind in this case, was the prime culprit for the destruction of Louisiana.

We definitely can learn one thing as an overall observation from the data—hurricanes are destructive and very unpredictable! You never know when and where one will strike. You also won’t know if you are dealing with a monster like Katrina until it’s almost upon your condo association property.

NOAA, the guys who predict hurricanes, is calling for a 75% above normal frequency of storms. Now would be a good time to take another look at the historical figures again. What is the answer you get to this question? Is my condo association property safe from a hurricane? If you are anywhere in Florida, the Gulf Coast, the Carolinas, or within 30-40 miles from the coast, the answer is probably  NO!

Now that I have your attention, there are things you need to consider in making sure that your property is ready for the storm.  Here is a short list:

1) Does your condo association or HOA have an emergency evacuation plan? Have you tested it in the past 3-6 months? Most hurricane prone zones of the United States require all commercial property owners to formalize and test these plans on a regular basis.

2) What is the age of the condo association's roof structure on your buildings? The odds of keeping the majority of your roof in place in a hurricane, is directly proportional to the amount of wind and the age of the roof.

3) Do you have backup records of your condo assocations accounts payables and receivables stored off site? Data archiving via the internet is a real attractive option for condo associations. Data storage these days is cheap. If you are susceptible to wind or water damage where you are, you can store your data in a remote location for getting back online a lot faster.

4) Do you have a condo association recovery plan? Most states require a plan be formalized and delivered to HOA loan providers and condo association insurance companies to provide a clear plan on how to get your condo association or HOA back on its feet quickly!

5) Are you saying, “This doesn’t apply to me?” Ok, granted, if your condo association is located in Orem, Utah, odds are pretty good that a hurricane won’t be knocking at your door any time soon. However, if you are within 50 miles of the Gulf or Atlantic coasts, it is not a matter of if your condo association or HOA will be a victim of a hurricane; it’s a matter of when!

Here are some risk management techniques to consider for your condo association:

1) Make sure that copies of all important condo association insurance documents (copies of policies, paid premium receipts, etc.) and business records are in a safe backup environment, preferably at least 100-200 miles from any major body of water prone to hurricanes.

2) Review condo association insurance coverage and limits with your agent. Does your carrier provide wind and flood insurance coverage? Can you purchase this condo association insurance coverage where your condo association is located?

3) Test your condo association evacuation and  recovery plans when there are no storms licking at your condo associations front door.

4) Have your roof and condo association property inspected. If repairs are needed, get them done before the storm. Your condo association insurance company may deny a claim if you haven’t maintained your property with current updates to roof, plumbing, electrical and heating. More importantly, you may prevent exposing your condo unit owners to unwanted water or wind intrusion by keeping your roof current!

Obviously, each condo association property will have its own unique issues and needs. The list I give above is merely a starting point. With proper preparation and condo association insurance coverage, you can insure that your condominium association won’t wind up gone with the wind!