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Insurance Coverage: Communities report significant challenges with rising premiums

Insurance Coverage: Communities report significant challenges with rising premiums

Insurance premiums have been skyrocketing across the country in recent years, causing many community associations to face significant challenges in obtaining affordable insurance coverage.


More than 90% of respondents in a recent survey conducted by the Foundation for Community Association Research reported that their property and casualty insurance premium had increased at the last or current renewal with 24% citing an increase between $101 and $500, and 14% citing a larger increase. Eleven percent of respondents indicated that their property and casualty coverage was canceled or not renewed. The communities that are experiencing premium increases are funding them by raising individual assessments (50%), using operating funds (43%), imposing a special assessment (7%), or resorting to other measures.


The Foundation collected nearly 900 responses from community association leaders—board members, managers, management company executives, and insurance and risk management professionals—representing at least 10,000 community associations.


According to Dawn M. Bauman, CAE, executive director of the Foundation, the survey results reflect a domino effect. “Unfortunately, disasters including hurricanes, wildfires, floods, and tornadoes have contributed to significant increases in insurance premiums, and that can result in increased regular assessments for many homeowners living in community associations. The Foundation’s snap survey results will help community association board members and managers better understand, manage, and explain the trend experienced by community associations across the country to homeowners.”


Growing more cautious about providing coverage in high-risk areas due to the increasing frequency and severity of natural disasters, insurance companies are reducing coverage options and increasing premiums. Of the risk management professionals surveyed, 83% said they were experiencing a significant number of property and casualty policy cancellations among clients, and 96% said they were experiencing a significant number of property and casualty policy premium increases.


Almost no state has seen such extreme impacts from this issue as California, where wildfires, earthquakes, floods, and other disasters can inflict substantial damage on homes and communities. Some communities in the state have seen insurance coverage costs double or triple in a single year.


Recently, the California Fair Plan Association expanded its insurance coverage options for community associations, as reported by The San Diego Union-Tribune. The California Fair Plan is a state-sanctioned program that provides insurance coverage to properties in high-risk areas that have been unable to obtain coverage from the traditional insurance market. The recent coverage expansion is expected to provide some relief, allowing communities to obtain coverage of up to $20 million for their buildings; coverage was previously limited to $8.4 million.


“There is a chunk of associations that will benefit from it, and there are a bunch of people who live in those homes who will benefit from it,” says Kimberley Lilley, CMCA, CIRMS, an insurance broker with Berg Insurance Agency in Rancho Santa Margarita, Calif., and chairwoman of the insurance task force for CAI’s California Legislative Action Committee. “But it is not going to be, and cannot be, the final solution. We are continuing to work on this.”


The state of insurance nationwide has presented significant challenges for community associations, including rising costs, limited insurance coverage options, and increased financial strain. In the face of ongoing natural disaster risks, community associations and insurance providers must work together to find sustainable solutions to protect communities and their properties.


by Hazel Siff | Community Associations

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