In times like these, every part of a community association’s budget should be scrutinized. Insurance is a tempting target when boards are looking to reduce spending, and some associations can obtain substantial savings while maintaining quality coverage. However, condominium and homeowners association boards should be aware of what state law and their governing documents say about insurance before they decide to make a major change in this area.
Condominiums created on or before July 1, 1990 and homeowners associations should focus on their governing documents when evaluating their current insurance. The Horizontal Property Regimes Act and the Homeowners’ Associations Act do not impose any insurance-related requirements other than those in the association’s governing documents. Condominiums created after July 1, 1990 are required to maintain the insurance that is required by the Washington Condominium Act, which includes property insurance on the condominium in the amount of at least 80% of the actual cash value of the insured property at the times that the policy is purchased and renewed and liability insurance for death, injury, and property damage relating to the use, ownership, or maintenance of the condominium’s common elements.
Once community association boards are aware of the minimum insurance requirements established by applicable statutes and their governing documents, they should examine their associations’ present insurance policies. Automatically renewing those policies without considering other available options could result in some associations missing a better deal. Mary Register, an insurance agent at Lovsted Worthington, recently pointed out to me that many condominium and homeowners associations can obtain as much or more insurance coverage for less money by switching to direct writers like Philadelphia Insurance or Fireman’s Fund. She also indicated that some associations would benefit from a re-assessment of the value of the insured property and the cost to rebuild it given the current market conditions. Even if an association decides to stay with its present insurer, Ms. Register noted that it can lower its insurance premiums over time by installing safety features like fire alarms and security systems.
It only takes one serious incident to realize the value of an association’s property or liability insurance policy. Boards should ensure that their associations have adequate insurance coverage, but they should also take advantage of the increased competition for their business to lower their associations’ premiums if possible. The owners will (or should) thank them later.
Condominiums created on or before July 1, 1990 and homeowners associations should focus on their governing documents when evaluating their current insurance. The Horizontal Property Regimes Act and the Homeowners’ Associations Act do not impose any insurance-related requirements other than those in the association’s governing documents. Condominiums created after July 1, 1990 are required to maintain the insurance that is required by the Washington Condominium Act, which includes property insurance on the condominium in the amount of at least 80% of the actual cash value of the insured property at the times that the policy is purchased and renewed and liability insurance for death, injury, and property damage relating to the use, ownership, or maintenance of the condominium’s common elements.
Once community association boards are aware of the minimum insurance requirements established by applicable statutes and their governing documents, they should examine their associations’ present insurance policies. Automatically renewing those policies without considering other available options could result in some associations missing a better deal. Mary Register, an insurance agent at Lovsted Worthington, recently pointed out to me that many condominium and homeowners associations can obtain as much or more insurance coverage for less money by switching to direct writers like Philadelphia Insurance or Fireman’s Fund. She also indicated that some associations would benefit from a re-assessment of the value of the insured property and the cost to rebuild it given the current market conditions. Even if an association decides to stay with its present insurer, Ms. Register noted that it can lower its insurance premiums over time by installing safety features like fire alarms and security systems.
It only takes one serious incident to realize the value of an association’s property or liability insurance policy. Boards should ensure that their associations have adequate insurance coverage, but they should also take advantage of the increased competition for their business to lower their associations’ premiums if possible. The owners will (or should) thank them later.
