8 Steps You Can Take to Make Your Condo/HOA More Insurable or More Affordably Insured
- Housz
- May 10
- 6 min read
Reposted from HOA Leader January 2025
Tags: HOA Cost-Cutting Tips
We're hearing it over and over, that insurance premiums are being hiked and that condos and HOAs are being dropped by their insurance carrier. Here, our experts share the advice they're giving to help their clients save money and stay insured.
This is Epic and Nationwide
It's not just on the nation's coasts, and it's not just in fire- or hurricane-prone areas. Condos and HOAs everywhere are struggling to insure affordably or at all.
“It's happening, and it's very significant,” says Cary Devorsetz, a partner at Alderman, Devorsetz & Hora PLLC in Washington, D.C., who for nearly 20 years has been representing condos, HOAs, and co-ops in the district.
“We're seeing premium increases,” he says. “We're also seeing carriers demanding a per-unit deductible as opposed to one incident deductible. We're seeing carriers require that especially with associations with a history of property damage claims related to water, which is maybe the most frequent insurance claim under the master policy.”
Here's what Devorsetz means. Let's say your condo, which has a deductible of $25,000, has water damage created by unit A. The damage also spread to units B, C, and D. In that case, the insurer would require your condo association pay the deductible four times, totaling $100,000.
The catch is that in Washington, D.C., where Devorsetz practices, unless the association's governing documents indicate otherwise, the law limits associations from seeking reimbursement from the unit owner who caused damage for any more than $5,000 of the association's deductible.
Condos and HOAs in the Midwest are facing similar problems, says Harry Styron, a community association attorney at Styron & Shilling in Ozark, Mo., who represents roughly 40 association clients at any given time. “We're seeing challenges with both insurability and increasing premiums,” he says. “Some condos and HOAs are finding that, because of their loss history, they're being denied renewals and then seeing cost increases of 20 to 200 percent in premiums when they seek coverage from other carriers.”
Likewise, it's a serious problem in Florida, says Joshua Krut, a partner at Kopelowitz Ostrow Ferguson Weiselberg Gilbert in Fort Lauderdale, Fla., who has 23 years in community association law. “The problem in Florida is that, because the legislature allowed associations to waive reserves until recently, a lot of buildings have fallen into disrepair,” he says. “So the cost of bringing them up to standard is multiplied.
“My understanding is that developers lobbied the legislature for that provision years ago so they could sell condos with low assessments,” explains Krut. “So people think it's not expensive to live in Florida. Today, many people are learning that it's more expensive to live in Florida.”
8 Steps You Can Take Now
You're not powerless against these risks and hikes. There are short-term actions you can take, and there's a long game you can begin playing, too.
Tell owners exactly what you're facing. “Be mindful of your budget and communicative with your community, being very transparent and clear, so there's no shock and awe and you're not facing a budget problem in the future,” advises Devorsetz. “That doesn't decrease costs, but it controls expectations, so the situation is less traumatic.”
Increase your deductible. This isn't great, but it's often the surest way to save money if you don't expect your building to be filing claim after claim. “Some of my clients are taking much higher deductibles,” says Styron. “It means that, to get the premium down, the association has to bear the direct financial risk of maybe the first $50,000 or $100,000.”
Ramp up your maintenance game. “Adopt preventive measures,” suggests Devorsetz. “For example, to help prevent water damage, make sure you clear common area pipes as recommended by a plumber. More broadly, make sure you have a schedule of preventative maintenance and are keeping an eye on it and not letting a pipe or water heater burst because you don't have or follow a maintenance schedule.
“Also, do occasional inspections of units with various professionals and engineers, and do your reserve study,” he adds “Sometimes boards are afraid of what the reserve study is going to find. But it's being a responsible fiduciary to not kick the can down the road with respect to your community's maintenance and finances.”
Make sure owners are keeping up their end of the bargain. “This can be tough to police,” admits Devorsetz. “But ensure that each owner has an HO-6 policy and enough coverage that's mandated if your law has such provisions.
“In Washington, D.C., amounts are mandated by law now,” he explains. “But coverage amounts under the condo act are low, and the act allows the board to require higher coverage.
“And the premium increase for the owner between the minimum coverage required by law and what the board might require might make a difference to the association but may not be so significant in cost to the homeowner,” notes Devorsetz. “That may be a win-win. But you have to communicate that clearly to owners and check compliance.”
Shift responsibility to owners. “I'm not an insurance agent, and there's only so much I can solve for a client when it's an insurance issue,” says Danielle Wang, of counsel at the law firm of Sands Anderson PC in Williamsburg and Richmond, Va., and the leader of its community associations team. “But there are two main issues I look at.
“The first is their governing documents to see if there's a proper delineation between the association's and the property owner's duties,” she explains. “I've been seeing premiums going up because the documents require the association to repair damage to a unit using insurance proceeds.
“Maybe it's a condo with many tenants, and maybe some are in college and don't understand the maximum capacity for laundry,” she says. “Mishaps can happen that are technically the tenant's fault but fall to the association to pay if they're using insurance proceeds.
“So I'm often looking at whether the documents are written in a way that minimizes or reduces the amount of coverage the association must carry, says Wang.”
Beef up your building's defenses. “It's somewhat building specific because every community has a little bit different situation,” says Krut. “But generally, at least in Florida, installing storm and hurricane-impact windows helps to dramatically lower premiums.
“It's about making sure all the structural items are up to date and that things that need to be replaced, like the roof, are replaced,” he says. “There's a dramatic up-front cost for things like that. These are very expensive items. But when you run the numbers, they usually pay for themselves after a few years. They're usually a good investment.”
Investigate a merger. “The second option I cover with clients is a little less oriented toward condos, though it could work for some,” says Wang. “There are often too many associations in a community. This was especially popular in the older communities, where every phase of the development had its own association, and each has its own amenities and so on.
“So there are tiny associations all over the place, maybe subject to a master association, but each has to carry its own insurance,” she notes. “You might have a 25-unit townhouse association, and another down the street. There's no economy of scale. We've been merging them to get some economy of scale and bundle insurance, which is a little cheaper. You can do that with condos as well. In Virginia, we even have a code section for merging associations.”
Terminate your association. “I've had two small condos with one-story, two-unit buildings—one had nine units, and another had 22 units—want to terminate their condo and convert to a duplex community,” says Styron. “They had minimal common elements and no clubhouse, and they sort of divide up the common elements.
“That's more doable when the streets are taken care of by the master association,” he adds. “It could be townhouses where they're two-story or more but side-by-side rather than located one over another. If one is located on top of the other, in Missouri, that entity pretty much has to be a condo.
“For those that can do it, they find that the insurance is cheaper,” states Styron. “Apparently, insurance companies see that as less of a risk in that, if they have a claim, it's going to be on only one or two units.”
The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Housz, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Housz, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.
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