Self Insuring a 39 unit condo HOA

Our HOA is considering self insuring our building. Our insurance premium for Catastophic loss and liability insurance for the last three years was around 20,000usd. At our last General assembly I proposed increasing our budget to $40,000usd, and since we have been strapped for cash due to extra ordinary costs the Finance committe, BOD and assembly felt less inclined to budget the money, since each owners has already been charged a special assessment in excess of $14,000. per unit. The best quote we have received is $65,000. At a 300% increase over last year and double the deductable, we feel it is best to explore self insuring the building and only carrying liabilty @$7,500usd. Has anyone experienced setting up a HOA with self insurance?.

Thank you!

For a condo where you are responsible for the owner's home I would be hesitant to do that. However, consider becoming self insured for things outside the main building. Your sign for example, maybe a wall or even the pool. Your reserves and setting aside some money every year to cover those.

Hi Dan:

I would not recommend self-insuring. However, if your insurance costs feel like they are eating up all the association's money, I would recommend the following:
1) Raise the deductible for losses (self-insure up to a certain figure, to be determined by the Board, possibly after consulting with homeowners).
2) Put in a budget line for insurance deductibles (figure at least two/year to be safe)
3) Save any excess income over expenses as a contingency fund for paying insurance deductibles.
4) Talk to your lawyer about any way you can assign the association's deductible to a unit owner to pay (for instance, if a washing machine overflows and it's their fault).
5) For any claims that would be a little ways over the deductible, don't file a claim if you can help it (example: if your deductible is $5000 and the HOA has a $6000 loss, dont' file a claim). Consider insurance as something you've got for catastrophic losses ONLY - like fire, hurricaine.
6) Check out whether earthquake coverage or flood insurance is needed/recommended. No use buying it if there's no risk, but worth having if there is.

If you underinsure, you are basically self-insuring for any loss above your limit.

My guess is that you either live in Hurricane country or have put in multiple small claims over the last year or two. The insurance industry woke up to the fact that they have a huge amount of exposure along the Gulf & Atlantic coasts due to hurricanes and has raised their insurance rates accordingly; they were probably too low to begin with, considering the risk.

Best of luck!

J. Patrick Moore, CMCA