The Truth Behind Rising HOA Insurance Premiums

In the last three years, the US community association industry has seen a dramatic rise in HOA insurance premium costs. Though this is hitting coastal, multi-family buildings the hardest, many states, including Utah, are seeing increases as well. Communities everywhere are faced with the difficult choice between protecting their community and keeping monthly dues increases reasonable.

What Is HOA Insurance?

HOA insurance, sometimes called an HOA Master Policy, offers financial protection against a variety of issues that can arise in a community, from physical safety issues to financial mismanagement. This will include the obvious coverages such as Building/Property Insurance and Liability Insurance, as well as some more specific policies like Directors and Officers Insurance and Fidelity bonds. Like any personal insurance policy, HOA insurance shields community members from having to personally fund the repairs or legal fees that may arise from accidents or incidents within the community. 

For communities with multiple units or shared spaces, such as townhomes or condominiums, HO-6 insurance serves as a complement to the master policy. This coverage provides protection for personal property and liability, ensuring that individual unit owners are also adequately covered. Without the safety net of insurance, the association and its members would be exposed to severe financial risks in the event of property damage, injuries, or liability claims. It is essential to adhere to insurance requirements dictated by the governing documents of the association to ensure comprehensive coverage for all members, regardless of property type or community structure.

Why is Insurance Getting So Expensive?

Like any provided service, insurance can increase over time due to outside factors like increases in inflation. For HOAs, several factors contribute to overall cost increases for insurance, including the age of the community, total amount of deferred maintenance, and the historical claims experience of the association. As insurance premiums continue to climb, the financial burden is inevitably passed on to homeowners through increased assessments. 

While not directly or solely responsible for insurance cost increases, it’s worth noting that in the aftermath of the collapse of a Miami high-rise condo building in 2021, many states saw multiple insurance providers stop servicing HOAs. Many insurance companies in areas prone to natural disasters, including here in Utah due to wildfires, did the same. The sudden decrease in competition gave remaining HOA insurance providers the ability to increase premiums with little repercussion.

How Do We Navigate These Costs?

The first step is avoiding the most dangerous traps. When HOA insurance premiums rise, many communities consider price and price alone. While the cost is undoubtedly a significant factor when selecting insurance coverage, it should not be the sole consideration. Opting for lower premiums may mean higher deductibles for homeowners, potentially resulting in increased out-of-pocket expenses in the event of a claim. 

Rather than solely focusing on the point-of-sale premium, decision-makers should prioritize comprehensive coverage that adequately protects the association and its members. Considering factors such as coverage limits, deductibles, and exclusions can help ensure that the chosen insurance policy provides adequate protection without compromising on affordability.

These considerations will help set a foundation of guidance for the future of the community. Pair this with your community’s Reserve Study to determine the best course of action to avoid maintenance deferment and claims reduction to give your community the best shot at long-term success without compromising on quality HOA insurance coverage. 

Strategic Support for Rising HOA Insurance Rates

HOA insurance prices are likely not going down anytime soon. It’s a frustrating reality, but one that communities can overcome. With the right tools, the right insurance coverage, and a strong plan of action to ensure your community remains a prime candidate for low premiums, your HOA can successfully navigate the rising cost of insurance premiums.

If your HOA needs help planning on how to prepare for their HOA insurance premium increase, contact us today for your free strategic evaluation. Our HOA experts have the knowledge and experience to help guide every Utah HOA through the tumultuous insurance landscape.