Securing Optimal Insurance Coverage for Your Community

As a member of your community association board, the voluntary hours you invest significantly contribute to building a secure and dynamic community. A critical aspect of this responsibility is scrutinizing your association’s insurance policies to ensure comprehensive coverage, adequate insurance, and the best value for your outlay.

Insurance serves a purpose beyond mere loss prevention. It represents a crucial component of your budget. Securing the most extensive coverage at the lowest cost can free up funds for other uses or enable savings. Moreover, having the right insurance safeguards against unforeseen and unwelcome surprises in the event of a loss.

Carefully managing your association’s insurance coverage is financially rewarding. By having the appropriate coverage, you not only save money but also enjoy peace of mind knowing your community is protected. Here are some key areas to focus on when evaluating your community’s insurance.

Start with an insurance review

Just like a reserve study, your insurance policies require regular reviews to ensure you have the appropriate coverage at the best price since rates fluctuate annually. Establishing a relationship with a trustworthy insurance professional can help with this task. A national property management company with significant buying leverage can assist you in saving on premiums and securing maximum coverage.

Recognize it as a specialized field

Many insurance professionals do not possess the expertise needed for providing policies unique to associations. This field differs from other insurance markets, with coverage options tailored for association-specific assets, such as landscaping. Seek out professionals experienced in this area, and inquire about the number of communities they serve. It's advisable to find a broker with the Community Insurance and Risk Management Specialist (CIRMS) designation, provided by the Community Associations Institute (CAI).

Understand the unique process

For those outside the insurance industry, procuring the right policy mix can seem overwhelming and time-consuming, often taking 90 to 120 days. The process starts with bidding, allowing carriers to entertain only one bid request at a time. Hence, you must assign different carriers to multiple agents if involved, which adds complexity. An experienced property management company can lend a hand here.

Ensure your association has suitable coverage

Protecting your association and its residents requires a tailored coverage combination. This typically involves a liability policy or "umbrella" policy that covers third-party claims related to bodily harm or property damage, extending beyond standard property insurance. While property insurance covers tangible assets like residential buildings and common areas, it’s crucial to note the distinction between property insurance and liability insurance.

Comprehend your liability policy

Your liability policy should encompass directors and officers coverage to shield the board and community manager from legal damages. It should include third-party discrimination coverage for occurrences like abuse, slander, and wrongful termination. Whereas most liability policies are "occurrence based," Directors & Officers (D&O) policies are "claims based." The timing of the claim report affects coverage, not when the event occurred. Avoid issues by promptly reporting claims or even notifying your insurer if litigation is mentioned, even without a formal filing.

Consider unforeseen losses

In your policy mix, ensure inclusion of workers' compensation and fidelity insurance. These cover your staff and hired contractors in case of injury, and protect against losses from theft, respectively. Some associations omit these and later regret the decision. Even without a payroll or considering theft unlikely, these policies are wise investments for managing risks and legal exposure.

Factor in building age

In cases of damage from incidents like fire or floods, your property insurance covers repairs, right? Not necessarily. Policies typically cover reconstruction to original standards, potentially leading to shortfalls if buildings don't meet current codes. Address this with Building Ordinance & Law Coverage, Parts A, B, & C. Part A allows partial losses to be treated as total losses. Part B covers demolition in compliance with Part A, and Part C addresses increased construction costs due to code updates.

Continuously seek savings

Even with the right policy in place, complacency is not an option. Like maintenance and other responsibilities, insurance needs regular review to spot potential savings and coverage gaps. Your property management company can keep you informed about beneficial new products and ways to reduce risk that translate to lower coverage costs over time.