As a condo association, your board has worked hard to maintain a certain standard. That could include the caliber of homeowner. In fact, in a few cases, condo associations have stepped in just as a condo owner is about to close the sale and exercise what’s known as “first right of refusal.” That is, the board will instead offer to buy the property instead of the buyer who has already lined up to purchase the condo. While the practice is much less used in a condo association setup, those people trying to sell through a cooperative association have one very large roadblock to overcome. Read more…
Photo credit: Flickr Gregor Rohrig
In the last post, we talked about insuring-to-value on a Replacement Cost basis, and about how it is advisable to insure at 100% of RC. We also introduced the concept of Property Coinsurance, which can be thought of as a “quantity discount” that gives you a better rate, provided that the limit of insurance you select meets or exceeds the coinsurance requirements you selected when arranging for your policy. Be aware, though, that to meet the requirements, the limit you select must be adequate at the time of loss – it is not enough to request a limit that is adequate on the first day of the policy.
Here’s an example: let’s say you get a professional property appraisal on your building on October 1, 2009 that says the insurable RC of your building on that date is $1,000,000. Your Property insurance policy renews on January 1, 2010, so that policy will run from 1/1/2010 to 1/1/2011. With that policy, you might be dealing with a loss that occurs on December 31, 2010 – fifteen months after the appraisal. Because your Property Coinsurance clause refers to the RC at the time of loss, if building costs were expected to be inflating at 5% a year, you should have asked for a limit of $1,062,500 (on a 100% coinsurance basis) on your 1/1/2010 renewal, to take care of the actual RC for that 12/31/2010 loss (5% inflation times 1.25 years since the appraisal = a factor of 6.25%).
Read more…
Photo courtesy of flickr - Last NYC Hero
Homeowner associations are under constant pressure to keep costs down. With the natural disasters that have occurred in the past year or so, the pressure is growing as insurance costs increase and are easily the largest expense in the budget.
Many Condominium and other community associations have considered self-insurance as an option. Self-insurance can reduce an associations’ premium by 20-40%. As good as that sounds, self-insurance should be fully investigated before jumping in.
What is self-insurance?
In a very loose interpretation, self-insurance is a typical property/casualty policy with an extremely high deductible in which the association is responsible for paying claims less than the deductible. State regulations to self insure Condominium, Cooperatives, Homeowners’, and Timeshare associations vary and must be carefully reviewed for your particular state and circumstance.
Those in favor of self-insurance feel that in their particular case the possiblility of a major catastrophe affecting all members of the plan is so remote and unlikely that the benefits outweigh the risks.
Those against self-insurance think that should a catastrophic event occur they would be financially unable to pay the claims in the instance of full replacement coverage.
If you think self-insurance is something to look into, contact an independent agent with access to multiple markets who specializes in insurance for community associations.
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