HOAleader.com - Tip of the Week - November 2, 2013
Published: Sat, 11/02/13
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Avoid These Unforced Errors in the HOA Insurance Game
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In this week's tip, we offer three ideas to ensure you don't make
all-too-common homeowners association insurance mistakes that end
up costing you and your owners money you didn't need to spend.
1. Not paying attention to your policy.
"One of the most simple things boards do wrong is not having the
right coverage before the pipe bursts on the 22nd floor, there's
a fire, or there's a storm," says Hugh Lumpkin, managing
shareholder at the law firm of Ver Ploeg and Lumpkin in Miami,
whorepresents HOAs in insurance matters. "It's because they
don't review their policy until after they've suffered a loss. By
then it's too late."
2. Not having full coverage.
"There are two ways the insurance company can pay," says Lumpkin.
"One is actual cash value, which is replacement cost less
depreciation. Associations can also buy replacement cost
coverage. In Florida, when we haven't had hurricanes in a number
years--like now--it's cheaper to get replacement cost coverage,
and it adds back into the equation the loss to depreciation.
Without it, you're not replacing your property with like kind and
quality materials, and you'll need those to properly replace
everything that was damaged."
3. Misunderstanding or trying to game coinsurance.
"Coinsurance is probably the most misunderstood term in the
insurance business," says Ryan Cassidy, a director at Franklin
Street in Miami, an insurer that provides policies to community
associations.
Here's a coinsurance overview. If you don't insure your structure
for the full amount of its value, your insurer may utilize the
coinsurance clause in your policy to penalize you when it comes
time to make a claim. For example, if your building is insured
for $900,000, yet the value is $1 million, your insurer may
determine that it will only cover 90% of any claim.
"Coinsurance keeps associations from underinsuring their
buildings in an effort to pay less in insurance premiums," says
Cassidy. "It's an agreement between you and your insurance
company that you'll keep your insurance values to a certain
percentage of your property value.
"The the value of your building should be reevaluated
frequently because your HOA could be paying too much for
replacement cost. Or, because you haven't had an appraisal in
forever, you could be falling under a coinsurance situation,"
says Cassidy.
Get six more tips to avoid unforced insurance errors in our new
article: http://www.hoaleader.com/members/906.cfm
Best regards,
Matt Humphrey
President
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Recent articles posted at HOAleader.com:
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To Catch a Scofflaw: Owners Tout Units on Rental Websites
An HOAleader.com reader asks, "Our 93-unit condo here in Washington state
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With the growth of websites, like Airbnb and VRBO, that allow owners to rent
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Can Members Bring Their Lawyer to HOA Meetings?
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you ask the lawyer to leave? What happens if the lawyer tries to hijack the
meeting?
Click here to read full article:
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Why You Should Enforce Your HOA's Rules Reason 225: Justin Bieber
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Click here to read full article:
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