Insurance Upgrades Switching Carriers for Better Coverage

Life, wrote the British playwright Tom Stoppard, is a gamble at terrible odds—if it was a bet, you wouldn't take it.

And thus was born the insurance business, an entire industry devoted to placing carefully calculated wagers on the risks involved in doing virtually everything. Most people are familiar with the process of shopping for health or auto insurance. But even long-time condo and townhome owners and board members may be unaware of the ins and outs of choosing an insurance carrier for their homeowner's association. And that can be dangerous.

Patricia A. Coombs, AAI, of the J. Byrne Agency, an insurance broker based in Wildwood, explains that in some cases, an HOA's master deed and bylaws may specify the precise nature of the coverage required for the community. If the association's board of directors or management team fails to secure that coverage, they may be liable in the event of an uncovered loss—and the community may be left footing the bill.

Time for a Change?

According to Tom Heist, of the Thomas H. Heist Insurance Agency, in addition to getting coverage in the first place, boards and management companies are also obliged to shop around every few years to make sure their policies and premiums remain competitive, providing the necessary coverage at a reasonable price. Both Heist and Coombs recommend that a community reevaluate its coverage every two to three years. (Coombs, who urges that all buildings be insured for their full and accurate replacement value, further recommends that properties be reappraised at least every three years.)

That said, however, it's not wise to go overboard with the comparison shopping, advises Paul Felsen, CPCU, of Felsen Insurance Services in Denville. Felsen notes that requesting quotes from carriers too often can have negative consequences. Some associations, for example, are required by their bylaws to get competitive bids on their master policies each and every year. But the co-op and condo insurance market is a relatively small, close-knit one, and doing that can lead carriers to treat your community like "the boy who cried wolf." Too much browsing, and they may eventually decline to provide quotes at all.

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