First, it is important to clarify the difference between an Independent Insurance Agent and a Direct Writing Agent – State Farm, Farmers, Allstate, etc. Independent Insurance Agents represent multiple carriers and work for the condo or HOA association and Direct Writing Agents represent one single carrier and work for the carrier.

Second, you need to select a CAI (Community Association Institute) Educated Business Partner as your insurance agent. This credential and more importantly the CIRMS (Community Insurance Risk Management Specialist) designation means that in addition to obtaining an insurance license, the Agent has gone through additional education and passed a test to understand the unique exposures around common-interest communities. This is critical for putting the insurance program together correctly. 

Third, an Agent cannot recommend a carrier just by knowing the name of the carrier. It is absolutely necessary to compare: building limits, property deductibles, co-insurance penalties, Margin Clause, Replacement Cost, Ordinance or Law coverage limits, “Single Entity” and “All In” Coverage versus” Bare Walls” (based on your Bylaws), Underground Pipes, Wind Driven Rain, Backup and Sewers, Flood and Earthquake limits (if applicable), etc. Your Agent should also review the policy forms and language and disclose which form is broader and which one has more exclusions or limitations. I’m intentionally focused on Property coverage because as a condo association, that’s where most of your insurance cost goes. However, you also need General Liability, Auto or Hired & Non-Owned Auto Liability, Crime - Fidelity, Directors & Officers, Equipment Breakdown, Workers Compensation (even if you don’t have employees) and an Umbrella policy. Please make sure that the Umbrella (not Excess Limits) extends over your GL, Auto, Employers Liability and D&O. Umbrella’s do not extend over Crime policies (theft).

When you request your renewal proposal(s), I would ask your Agent(s) to send you an insurance proposal with a comparison of all companies quotes, including the items listed above at the minimum, in an Excel Spreadsheet which should make you and your Boards review easier.

Check each carriers claims paying reputation and make sure they have stable financial ratings via (A.M.BEST). In addition it is necessary to base your decision on the coverage comparison, not necessarily the lowest premium. If you are not happy with the Agent, you can also use an “Agent of Record” letter to reassign the insurance representation to a more qualified Agent. The AOR process takes 10 to 15 days and the carriers will need to honor the same terms offered to the former broker.

Community association managers and board members should define their association’s insurance needs and expectations by working with an insurance  professional knowledgeable in establishing insurance and risk management goals relative to community associations. Just as community association managers and board members partner with their attorneys and accountants to effectively manage their community associations, so too should they partner with their insurance agent to effectively manage the unique risks they face. Carefully review state and local statutes under which the community was developed and the recorded documents of the association to determine the type of Coverage and who is responsible for paying the Master Policy Deductible. Community Associations owe it to their members to obtain appropriate insurance for their specific requirements and attempt to offer purchasing information for their Unit Owners once the Board and their Attorney have agreed on their findings.

Property Insurance -In a sense, property insurance is the foundation upon which other coverages are built. Property insurance provides coverage for all buildings, structures, and personal property owned by the association. This will often encompass common property, parkland, woods, open spaces, recreational facilities, buildings, and sometimes portions of residential areas.

Replacement Cost Coverage – Accurate replacement cost valuation of property is essential. In some cases, the concern of accurate valuation can be eliminated or mitigated by purchasing guaranteed or replacement cost plus coverage if available. Coinsurance and Agreed Amount Coinsurance is a method of encouraging community associations to obtain insurance in amounts more nearly equal to the value of the property insured, usually specified at 80, 90, or 100 percent. It provides an incentive for adequate insurance-to-value by providing a rate credit for carrying relatively high limits to value. It provides for the full payment, up to the amount of the policy, of all covered.

As the market for community association insurance grows, the types of coverage offered in different policies can become very complex. Comparing quotes from different insurance agencies and companies can become confusing. This issue of Insurance Focus outlines the major community association property and casualty insurance areas and highlights important coverages in each area. In addition, we have available a handy checklist to use when reviewing your association’s current insurance or when shopping for new insurance.

Where should we start?