Many HOA’s are experiencing a significant increase in their insurance rates over the past several years. You might be feeling the sting when it’s time to renew, but the rise in premiums is a result of a mix of broader economic trends, evolving risks, and claims-related factors.
The Increasing Costs of HOA Insurance
Over the past few years, we’ve seen a steady rise in HOA insurance rates, and many policyholders are wondering: Why now?
1. Climate Change and Natural Disasters
The frequency and severity of natural disasters like wildfires, floods, hurricanes, and hailstorms are on the rise all over the country. These events not only cause direct damage to properties but also lead to increased costs for national insurance companies. Insurers are adjusting their rates to cover these potential risks, which directly impacts your HOA’s premiums.
2. Inflation and Rising Construction Costs
Inflation has a wide-reaching effect, including on the construction industry. The costs of building materials, labor, and overall construction have risen sharply. If your HOA needs to rebuild or repair buildings and/or common areas after a disaster, those higher costs will be reflected in your insurance premiums. Additionally, property values tend to increase with inflation, meaning the amount of coverage needed to protect the community also goes up.
3. Increased Frequency of Claims
The number of insurance claims in the HOA sector as-a-whole has been climbing, particularly related to water damage, fire, and vandalism. This rise in claims forces insurers to reassess their pricing structure to ensure they can cover the claims. When more people are filing claims, the cost of coverage for everyone goes up.
4. Limited Availability of Coverage
The insurance market for HOAs is not as expansive as it once was. Several of the large insurance carriers (like State Farm, Farmers, Travelers, etc.) have pulled back from certain regions or types of properties due to the increasing risks. With fewer insurers competing for business, the remaining providers have more control over pricing, which often leads to higher premiums. We know it’s frustrating. That’s why we became an independent brokerage so that we are able to shop all the markets on your behalf so you have options, whenever they’re available.
5. Changes in Coverage and Liability
HOAs are facing higher liability risks, especially as more communities face lawsuits related to governance, construction defects, or even accidents that happen in common areas. Increased legal costs and settlements lead to insurers raising their rates to stay profitable. Insurers may also reduce the amount of coverage they’re willing to offer, leading to even higher premiums for HOAs that need additional coverage.
What Can You Do About It?
Although HOA insurance premiums have risen, there are steps you can take to help manage costs without sacrificing protection for your community.
1. Review Your Coverage Regularly
Make sure you’re not overpaying for unnecessary coverage or underinsured in certain areas. Regularly reviewing your policy with an insurance broker ensures that you have the right coverage for your needs. Consider adjusting coverage limits if the value of your property has increased or if you’re in an area with higher risk.
2. Increase Your Deductibles
If your HOA has the financial flexibility, consider increasing your deductibles. A higher deductible often leads to lower premiums. However, ensure you have adequate reserves to cover the increased deductible in case of a claim.
3. Mitigate Risks
Insurance companies often reward communities that take steps to reduce risk, ie: Installing security systems, improving fire prevention measures, and if the HOA is over 25 years old – verifying you have updated electrical panels, and an updated roof may help lower your premiums. Insurers may offer discounts for properties with advanced safety features. It is recommended that you speak with your insurance broker for suggestions about what your specific HOA can do to potentially mitigate risk and possibly lower premiums.
4. Use an Independent Insurance Broker for Option
Insurance rates vary greatly from carrier to carrier. As an independent broker, we have access to many carriers – we will go out to all markets on your behalf with the goal of bringing you options to choose from. An independent broker can be your one-stop-shop and can help you find the best coverage at the most competitive rates. Even if your current insurer is raising rates, there may be other options that provide better value.
Planning Ahead for Rising Insurance Costs
The rise in HOA insurance rates is a reflection of broader economic and environmental trends. While it may seem like an inevitable burden, understanding why premiums are going up and taking proactive steps to reduce costs can help your community stay protected without breaking the bank.
As your independent HOA insurance broker, we’re here to help you navigate these challenges. If you’d like to discuss how we can help lower your premiums or find the best coverage for your HOA, feel free to reach out to us today.
