Master HOA Insurance premium

Our master insurance premium went up 21% to $91,000 for 84 units. We presently have a $40,000 deductible. As I have looked into this, I have discovered that is some parts of California and Florida the premium has increased to a point that a special assessments were implemented. Some insurance companies in Minnesota are either moving out of state or at least deleting their HOA accounts. The future does not look too good as this issue will continue to become a bigger part of the Operating budget. Some HOA's are looking to increase deductibles to $50,000. Suggestions.

You can also talk to your individual homeowners insurance about adding loss assessment coverage to your policy.

I've heard of HOAs setting up contingency line items in their budgets - it's designed to pay for unexpected expenses the operating budget can't cover. You might want to talk to the association accountant about this (it'll have to go into next year's budget) and your assessments will have to reflect that line item. I suspect this is more fallout from the Surfside mess in Florida, so you may want to take a close look at your reserve fund. It's not a contingency fund, but is supposed to pay for major repairs and replacements to the common area and reserve funding should be influenced by a reserve study. When was the last time your community had one? If it's been more than five years, that should be a project for this year and be completed before the Board begins planning the 2024 budget.

Also, is your operating budget keeping up with inflation? It's amazing how people forget about that when planning any type of budget, and when they find the HOA assessment has to increase to keep up with this stuff, all hell breaks loose. I don't know what's been going in in your community, but if it's been years since your assessment has increased, brace yourself for one next year and it may be hefty in order to be more in line with reality.

Tim and Sheila posted good information. I agree that this is going on all over the country, although some parts have been hit harder.

Traditional advice for keeping premiums downs:

* increase your deductible, which you've already done.

* minimize claims - insurers will penalize insured persons or entities if they make numerous small claims, sometimes to the point that the insured becomes uninsurable altogether. In my community, if the bottom line is close to our deductible, we go ahead and pay for the repair out of pocket and don't make a claim at all.

* longer term solution: some of our trouble results from our society essentially paying people to live in high risk areas. We need to stop doing that, individual homeowners should bear the cost of living in a paradise that floods or gets blown to smithereens on the regular. Lobby your congress critters.

Which seems a little crazy - you've bought a product with the intention of not using it. But my philosophy is that insurance is to get you back on your feet when you've had a serious event - it isn't to make you whole or to address every adverse event. We have to modify that a bit for condos since the association may in fact have to make people whole - but we determine which bucket the money will come out of, and the association's bucket may pony up some or all of it.

Thinking out loud here: is there some way you can have a professional risk assessment done in your community? If you know where your potential danger spots are, you can take steps to mitigate the risks - consider upgrading parts of your buildings and being more vigilant with maintenance, for example, or being more vigilant about violations that can cause problems. Would your insurance agent be able to point you toward such resources? The folks who handle your reserve studies may also be helpful. (I'm seeing a potential business opportunity here.)

Also check out resources in states like Florida where they're really in trouble: sea level rise and flooding, more frequent and more severe storms, construction issues, and years of poor maintenance by homeowners. They're further along this path and so may have already implemented some useful ideas.

You're not alone in this. I think all of us are going to have to face the insurance issue sooner or later. Even if your state or community aren't having insurable issues, everyone will be affected by shakeups in the insurance industry as a whole. And this is going to make housing increasingly unaffordable for a large majority of us - Florida is already there with the crumbling condos and owners howling that they can't afford higher assessments to repair their homes. Boards are really stuck between financial realities and homeowners who don't want to or can't afford to deal with them.

In a different thread Sheila talked about the benefits of living smaller, more sustainable lives - and this applies here as well, I think. We'll learn eventually - or we won't - but we'll get dragged kicking and screaming and throwing large piles of money around the entire way.

I had this discussion with the president of one our condo sub-associations today. Here is the amount of their insurance policy over the last few years. They have 22 buildings with 4 units per building.

$47,000 2019-2020
$67,000 2020-2021
$97,000 2021-2022
$116,000 2022-2023
$143,000 2023-2024

They raised their deductible from 2% - 5%. All of our three condo sub-associations had to finance their premiums and do special assessments for the insurance increases. It's just not sustainable.

I also heard today that we have discovered several of our owners in duplexes who are "self-insuring" because they can't afford the premiums. Basically, they are gambling with no insurance. And these are our homes that share a single roof for both duplexes - so they can't even submit a claim for their half of the roof.