Insurance costs can take up a large chunk of a homeowner association’s budget. While insurance premiums may have risen in recent times due to inflation and higher occurrences of natural disasters, there are ways you can cut insurance costs and secure more allocation to other expenses. Here are eight strategies to cut HOA insurance costs:
1. Conduct a risk assessment
Your HOA insurance provider will give you a quote based on the risk associated with your community. The insurer will evaluate your HOA’s claims history, property condition, and overall risk exposure. If you focus on ensuring good property management while reducing losses, your HOA may benefit from a lower premium. Here are some tips to conduct a comprehensive risk assessment and implement a sustainable risk management protocol:
- Identify potential threats to the community by thoroughly reviewing property maintenance operations.
- Ensure the association’s finances are in place by running a financial audit.
- Set up clear policies and procedures for property maintenance and safety protocols.
- Discuss with your insurance agent your HOA’s risk management efforts and ask about discounts or incentives for implementing certain risk management measures.
- Keep up with updates on local crime rates or laws affecting HOAs that can potentially impact your HOA’s insurance costs.
- Maintain proper documentation of safety protocols in use, maintenance schedules, inspections, and any activity geared towards minimizing risk.
With a proper risk management protocol in place, you can ask your insurer about discounts or incentives for implementing certain risk management measures. This way your HOA may benefit from lower premiums.
2. Consider a higher deductible
A higher deductible insurance plan allows you to pay lower premiums as opposed to a lower deductible plan where you pay a higher premium. If you choose a higher deductible, you will be able to increase your savings and cut costs. But this comes at a cost; when you file a claim, you’ll pay more from the association’s account upfront before insurance coverage can kick in. Essentially, you’re betting on not filing constantly for claims to enjoy the long-term benefit of paying lower premiums.
3. Review your HOA insurance coverage
Your HOA insurance premium cost is directly proportional to the amount of coverage you sign up for. You may be paying more than necessary for insurance coverage if your plan is designed for a larger-sized community than yours. Ensure your property assets’ are not valued higher than they should be. However, you don’t want to undervalue your properties while trying to pay less for insurance coverage. The idea is to make sure your properties are insured at their correct value and not inflated to avoid paying more for an HOA insurance policy.
4. Update your HOA’s protection class if possible
Insurance companies use ‘protection class’ to determine the level of risk associated with a property based on how close it is to a fire department or water source. Insurers use a scale of 1 to 10, with 1 being the best, indicating the community is in a highly protected area, and 10 being the worst, suggesting the community is in a highly risky area. The protection class also factors in crime rate and frequency of natural disasters.
Class 1 to 5 communities typically have lower risks and tend to enjoy lower premiums. While communities with higher protection class present higher risks and usually get bigger quotes from insurance companies. You can reduce your insurance costs by requesting a protection class assessment after improvements are made to the area—like installed fire hydrants, improved fire response times, or the establishment of a nearby fire station.
5. Invest in home security
When negotiating your HOA’s insurance coverage with an insurance agent, showing that your community is risk-averse can help you secure a lower premium. Communities with security systems like fire alarms, CCTV or other camera monitoring systems, burglar alarms, and water flow sensors may benefit from automatic discounts, though not always. These pieces of equipment help to lower the likelihood of property damage, resulting in fewer claims, ultimately positioning the HOA to benefit from a lower premium.
6. Bundle your insurance policies
A typical HOA insurance does not include coverage for flood, earthquake, or crime allegations. HOAs secure these additional insurance policies separate from a basic HOA insurance plan. But working with different insurance companies to cover various needs in your community can raise insurance costs. Companies like Nextier Insurance offer discounts for bundling policies to reduce your overall insurance cost. You can request that your HOA insurance provider customize your plan with additional policies to cover workers compensation, natural disasters, or any other needs.
7. Buy a longer policy
Committing to a longer insurance policy can secure a lower premium for your HOA. Many insurance companies offer discounts for committing to a longer policy term, usually 3 years and above. Signing up for a longer policy may guarantee that your HOA’s premiums won’t increase significantly each year. This way, your HOA can budget concisely for insurance annually. However, while there are clear cost benefits to locking in for a longer policy, you may be unable to switch insurers if a better offer comes along or your HOA undergoes significant changes that affect insurance plans. Also, buying a longer policy does not always guarantee that the insurance company won’t hike rates.
8. Manage your claims history
Your claims history serves as one of the most important decision-making factors for underwriters. If your HOA has a history of frequent claims or if the claims are large in size, you may be faced with higher premiums. But if your claims history proves your HOA is low risk, you’re more likely to get the best premium offers. Insurance companies are usually not willing to take on clients that will constitute constant risk or claims, as these clients can result in higher-than-expected payouts and losses.
Conclusion
From reducing risk levels by investing in security systems to bundling your insurance policies, these strategies can help your HOA reduce insurance costs significantly. An experienced insurance agent like Nextier Insurance can walk you through the exact steps to take to qualify for a lower premium in your state. Speak to an expert now.
