This regularly-scheduled sponsored Q&A column is written by Val Sotillo, Northern Virginia-based Realtor and Falls Church resident. Please submit your questions to her via email for response in future columns. Enjoy!
Question: I’m the Treasurer at [redacted Condo Association] and we’re working on the 2019 budget. What’s a good way for us to save money in the budget without compromising the health and maintenance of the building?
Answer: Review your Master Insurance Policy. I know, it’s not the most exciting answer, but your insurance policy is likely a top three expense on your balance sheet every year and if you haven’t reviewed it lately, there’s a good chance you can cut the cost by 5% or more and probably improve your coverage at the same time.
I’m not an expert in insurance so I asked Andrew Schlaffer, Vice President at USI Insurance Service’s Community Association Practice to provide some details on what Board’s should look for when they do a review of their Master Policy. Take it away Andrew…
Pillars Of Insurance Reviews
Condo insurance reviews require a holistic approach, so it’s important to break the cost into a few distinct categories: insurance premium, deductible expense and out-of-pocket costs. To effectively accomplish long-term savings, all three of these categories need to be considered and addressed with a qualified insurance professional.
Adjust Coverage Responsibly To Save On Premium
Premium is certainly a factor to consider during the insurance selection process; however, available insurance products differ significantly.
Coverages and services should be very carefully analyzed and compared. While omitting various coverages will save premium dollars, it might also result in substantially increased costs to the Association for out-of-pocket expenses related to uncovered claims.
It is critical to work with a professional who understands local insurance needs and can adjust your insurance program in a way that maximizes premium savings while maintaining adequate insurance coverage. Some coverages may be required by statute and/or Association documents, so cutting required coverage exposes the board to unwanted risk.
Deductibles Based On Loss History
Associations with strong financials often choose to increase their property deductibles which can provide immediate savings of 2-5%. Deductibles range from $2,500 to $25,000+.
When considering deductibles, it is important for the Association to review their loss history and the loss history of comparable buildings in an effort to obtain an accurate estimate for deductible expenses.
The most common strategy employed by Associations seeking lower insurance costs is to shop their carrier.
An Association can accomplish this in several ways but generally their appointed broker can offer alternative carriers in an effort to obtain the most competitive rates possible. Make sure your broker has access to all of the competitive markets in order to maximize the likelihood of finding savings.
Secondly, and more importantly, if savings is found, your broker should verify that all required coverages are included to secure the Association’s long-term financial security and lender approval. Additional savings can be realized by a thorough coverage analysis to verify the Association is not being over-insured by paying for coverage it won’t use.
We are in a relatively soft insurance market, so an Association can expect savings of 2-5% from a simple review, depending on the number of claims that have occurred during the previous policy period.
To insure cost savings and long-term health of your property, make sure your insurance broker specializes in Condominium or Homeowners Associations. To maximize your savings, the Association, insurance broker and insurance carrier need to work in harmony in an effort to identify and reduce threats to the financial health of the community.
Help Reducing Claims
One of the best ways to keep insurance costs down is to avoid claims altogether.
Some examples of how insurance brokers can help reduce claims and the impact claims have on your future premium costs include coverage reviews/benchmarking, claims management services, site inspections, building upgrade recommendations, life safety planning, vendor contract reviews, discrimination/harassment training and hiring/firing best practices.
Andrew, thank you very much for providing your insight. I know from experience how much of an impact an insurance review can have on a condo budget, but also how important the right coverage can be when there’s an unexpected claim.
One thing Board’s often overlook when they’re solely focused on price is the quality and speed of service when a claim in filed. For example, if a pipe bursts and floods the gym and lobby, a Board should be confident that the work orders will be executed quickly so the building can be back on its feet without delay or headache.
Unfortunately, most Boards don’t think about this until they’re dealing with it, and it’s too late. I encourage any Board/Treasurer to reach out to Andrew to review their policy. He does fantastic work and USI is a leader in Condo/HOA insurance policies in Northern Virginia.
His contact info is:
Andrew Schlaffer, Vice President
USI Community Association Practice
If you’d like a question answered in my weekly column, please send an email to [email protected]. I hope to hear from you soon!
Val Sotillo is a licensed Realtor in Virginia, Washington D.C., and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, 703-390-9460.