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Attention all insureds with HO-6 policies (also known as condo, townhome or patio home)!!
It is important to know the loss assessment amounts attached to your master HOA policy to avoid any short falls in coverage.  This article form Jack Hungelmann explains the changing association deductibles.  Give us a call today, we can go over all your coverages with you.

WITH the large number of weather-related property claims in the past five years and with the dollar amount of claims far exceeding premiums, the pricing of habitational property insurance has skyrocketed; in some cases, the coverage has become unavailable. This development has adversely affected the finances of condominium and townhouse associations, which traditionally have insured the ownership interest of all unit owners under a single master policy. In the past two or three years, nearly all the major players-insurers who in the past have aggressively competed for these master policies have fled the scene. Only a handful today are open to new association business--and then only for very preferred risks (built in the last 20 years, no more than one or two claims in three years, roof recently replaced, no swimming pools, etc.). Often, coverage for associations with an unfavorable loss history must be sought in the surplus-lines market, where rates can be 300% to 800% higher.

Here are three examples of this problem that I've witnessed first-hand as a consultant. Each association had filed three to five claims in the preceding three years, most of them water-damage claims (broken pipes) for less than $5,000 each. One 100-unit association, which had paid $13,000 a year until it was nonrenewed, could not find replacement coverage for less than $72,000. For a 40-unit association, which had been paying $8,000 a year, the best price available for replacement insurance was $56,000 a year. The insurance cost for a 250-unit association went from $35,000 a year to $280,000. Each association had a half-dozen agents scouring every known admitted insurance company and was willing to accept deductibles as high as $25,000. Not one taker!

When faced with overwhelming cost increases, most associations, even loss-free ones, do the prudent thing-they raise their property insurance deductibles. The usual $1,000 deductible becomes $5,000, $10,000, or even $25,000. Not only do the higher deductibles reduce today's premium, but they also eliminate most of the small losses. Fewer losses reduce future premiums and protect the policy from nonrenewal.


Posted 4:33 PM

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