COMMUNITY ASSOCIATIONS
Navigating Rising Insurance Costs In Community Associations : The Balancing Act
BY : DAVID VELASCO , EBP , ADVISOR , JGS INSURANCE , A BALDWIN RISK PARTNER
Imagine walking a tightrope over a deep canyon , trying to keep your balance . That ’ s what it ’ s like managing finances in community associations these days , especially with insurance costs skyrocketing .
In recent years , Condos , HOAs , and Co-ops have struggled with crazy-high insurance prices . A whopping 91 % of community leaders say costs are going up , hitting finances hard . Why ? Blame severe weather , inflation jacking up rebuilding costs , and insurance companies backing off from covering residential properties .
INSURANCE FACTORS YOUR COMMUNITY CAN ’ T CONTROL
Most of these factors are out of your control . Because insurers look at things on a national scale , what ’ s happening across the country affects how they view properties in your area . This has led to insurers being less interested in covering Condos and HOAs , making it harder to find policies and pushing premiums skyhigh .
Just like you and I , our communities are aging . Buildings get old and start falling apart . By the end of 2022 , the average commercial building in the United States was 53 years old . Older buildings need more maintenance and become riskier to insure , especially when disasters strike .
BUT HEY , IT ’ S NOT ALL DOOM AND GLOOM . THERE ARE THINGS YOU CAN CONTROL TO HELP DEAL WITH RISING INSURANCE COSTS .
INSURANCE FACTORS YOUR COMMUNITY CAN CONTROL
1 . Current Exposure : Some things we can ’ t change , like the type and age of our buildings . But we can work on improving them over time . Inspections and reserve studies help us figure out what needs fixing and plan for it . Getting professional advice is key here .
2 . Loss History : Insurance companies look at our past to figure out how risky we are . If we ’ ve had lots of claims , they ’ ll hike up our premiums . So , it ’ s important to invest in preventing accidents and getting experts to assess risks . It saves money in the long run .
3 . Representation : Communication is crucial . We need to pick the right partners , from brokers to contractors , who can help us manage risks effectively . Being transparent with residents builds trust and support , making it easier to implement risk management plans .
WINDS OF CHANGE
Some positive changes are happening too . Some states like New Jersey and Florida are now mandating reserve studies to protect owners from financial disasters . And reinsurance companies are forcing insurers to up their game , making sure properties are insured properly .
FROM INSIGHT TO ACTION
Dealing with rising insurance costs is tough , but it ’ s doable . By understanding what we can control , taking action , and communicating openly , we can navigate these challenges together . After all , it ’ s easier to stay balanced on the tightrope when we ’ re not walking it alone .
How Is Your Premium Calculated ?
To understand your association ’ s budget better , consider this equation : 3 x 4 x 5 = 60 . On a scale from 1 to 10 , where 1 is excellent and 10 is terrible :
• Your current exposure ( 3 ) reflects who you are as a community . For instance , an oceanfront high-rise in New Jersey might be a 9 or 10 .
• Your loss or claim history ( 4 ) is crucial . No losses in 5 years might rank you as a 1 , while one significant accidental fire could put you at a 6 and smaller but high-frequency claims may put you as an 8 .
• Your representation to the market ( 5 ) matters . Having a strategic written plan in place that is acted upon and communicated to the market will push your score closer to 1 .
The number 60 represents your fictional premium . Any changes , positive or negative , to your current exposure , loss history , and representation number will result in a corresponding effect on the premium . +
David Velasco has worked in the habitational industry for close to a decade and thrives on connecting people . Solving problems for clients and connections is his daily motivation . Joining the JGS team is a natural progression of his path forward . Serving on the committees of several organizations , he is a recognized industry professional , providing education through his webinar series , public speaking engagements , and social media presence .
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