Along with management fees, insurance premiums represent one of a homeowners association's largest annual expenses - and with good reason. Protection from major financial loss is integral to a civilized society. Without the security of insurance coverage, our world would have a different look and feel.
Would anyone invest millions of dollars to build a gorgeous, sprawling condominium complex without the safety net of an insurance policy, knowing that one ill-placed candle could cause a fire, and thus financial ruin? Who would spend hard-earned money on beachfront palaces, if one natural disaster could wash the whole thing away, literally and figuratively? Who would buy into a condo or co-op without the protection insurance provides, relying only on blind trust of dozens - if not hundreds - of strangers?
Insurance policies come due every year. Savvy managers send them to bid every year, to ensure that the homeowners association is paying the lowest premium for the best service. HOAs, then, tend to be in the proverbial driver's seat when it comes to insurance, especially in the age of the Internet. But what happens if a homeowners association is dropped by its insurer? While not a frequent occurrence, this does happen, leaving the HOA scrambling.
Why would an insurer drop a client? How can HOAs protect themselves from getting dumped? And if it happens, what should the board do? Here are some words of wisdom that may help if your association ever finds itself in such a predicament.
The most common reason an insurer will drop a client is, the insurance company is losing money. Obviously, expensive claims are the main culprits when an insurer hemorrhages cash. Policyholders who are chronic claimants are the ones most at risk of having their policies dumped.