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7 Easy Steps to Purchasing Condo Association Insurance

    1. Research condo association insurance companies before condo association insurancebuying homeowners association insurance. The loss ratio varies greatly from company to company making the premiums also vary.
    2. Shop around for an independent condo association insurance agent who has extensive knowledge on homeowners association insurance. Some of the larger insurance companies like State Farm and Travelers offer master insurance policies specifically designed for HOAs. Study condo association insurance policies thoroughly. Make sure your policy has fire and hazard, directors and officers liability, employee dishonesty and general liability coverage.
    3. Consult with your condo association insurance agent to see if you need additional coverage such as earthquake, building ordinance or law coverage. Earthquake coverage is only purchased if you live in a region that is likely to have earthquakes. Earthquake insurance is usually 10 percent of your premium. Building ordinance or law coverage is always good to have, as it covers increased construction cost if it is necessary to make building changes due to zone or building laws.
    4. Determine what your insurance premium should be with your agent. Deductibles start at $2,500. Of course the higher the premium, the less the homeowners association will have to come up with out of pocket.
    5. Explain thoroughly to all condo association members in the plan that they must carry homeowners insurance and that the homeowners association insurance does not cover their contents or personal belongings.
    6. Delegate condo board of directors and officers as employees, so they can be covered under the employee dishonesty section of the homeowners association insurance.


How To Buy Condo Association Insurance

condo association insurancePurchasing condo association insurance is one of the most important buying decisions the board will make. The decision addresses risk management and must meet or exceed any insurance requirements mandated by the state and the HOA's governing documents.

Step #1: Start Early. Begin the process at least 90 to 120 days prior to the renewal date by ordering updated loss histories from all insurance carriers who have provided coverage for the Condo Association for the past three to five years. While requesting the loss history, don't forget to confirm with the current agent/broker his opinion as to whether the current insurance carrier will be offering a renewal.

Step #2: Check Loss History Accuracy. Losses can be miscoded (like "Mold Claim," when it wasn't), or a loss that should have been attributed to a different insured or a loss that continues to appear on the loss history even though the insurance carrier successfully subrogated against the negligent party (got repaid). It's also possible your carrier's version of your loss history doesn't really reflect today's condition of the property. If your HOA has taken steps to improve the property since the losses occurred, write a narrative about those steps taken and attach it to the loss history. If a particular problem has since been corrected, make sure the carrier knows it.

Step #3: Assemble a Complete Bid Package. Preparing a complete bid specification will make the evaluation process easier. The bid package should include:

  1. Brief description of the property including the number of units, year built, type of construction, overview of amenities (pools, spas, etc.) and any other structural improvements the HOA may have an insurable interest in;


  2. Copies of the governing documents;


  3. Copy of the site plan;


  4. Current three year loss history on the prior carrier's letterhead;


  5. Copies of the declarations page from the current year;


  6. Copies of the HOA's most current financial statement and budget; and


  7. Current appraisal (if available).

Steps #4: Assign the Markets. An condo association insurance carrier will only release a premium quote to one agent. If more than one agent wants to use the same insurance carrier, you'll have to assign which person will access that market on your behalf.

Step #5: Evaluate the Insurers. While there are five well-known insurance rating organizations, most HOAs rely on AM Best. The letter grade ratings (A through F) and financial size categories (Roman numeral I through XV) can give you a quick barometer of a carrier's health. In addition to the financial ratings, the board will want to consider the carrier's experience with HOAs. A carrier who is new to the homeowner association market is probably not a good fit.

STEP #6: Is the Agent Qualified? Consider years of experience insuring Condo Associations and HOAs and involvement in industry trade organizations like California Association of Community Managers (CACM), Oregon Washington Community Association Managers (OWCAM) and Community Associations Institute (CAI). The agent/broker professional designations should include CPCU (Chartered Property and Casualty Underwriter), ARM (Associate in Risk Management), CIC. (Certified Insurance Counselor), and CIRMS (Community Insurance and Risk Management Specialist).

STEP #7: Use a Spreadsheet. Even the most experience risk manager will create a "line by line" comparison of the coverages and benefits being offered by the various companies offering a proposal. A visual representation of this type will easily illustrate the merits or deficiencies provided by one proposal over another and will tell you if a certain proposal is competitively priced only because the agent/broker has omitted an important insurance coverage.

STEP #8: Let Price Be the Last Consideration. Price is important but don't fall into the trap of going to the "bottom line" first. If you do, you may forget the number one goal of buying insurance: protecting the HOA's assets. Be certain that you're getting what you need before signing the check.



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