Ah, insurance — it’s a topic that can make even the most seasoned board members scratch their heads.
Navigating HOA insurance in Florida can feel overwhelming due to its changing landscape and unique challenges. However, it’s crucial to stay informed to protect your community’s interests. That’s why we’ve asked Tyler Spaedt, an Insurance Advisor specializing in community associations to discuss the current state of HOA Insurance in Florida and to provide tips and guidance.
In this article, we’ll also cover key differences and offer a helpful glossary to ensure you understand everything about insurance.
Homeowners Insurance vs. HOA Insurance:
Let’s begin by clarifying the distinction between homeowners insurance and HOA insurance. As a homeowner, you likely have your own homeowners’ insurance policy, which covers your individual property and personal belongings.
However, HOA insurance is different. It is a comprehensive insurance policy that protects the common areas, shared facilities, and the collective assets of your entire community.
HOA Insurance vs Condo Insurance
In homeowners associations with individual home units or lots, it’s relatively straightforward to distinguish between individual and common areas. However, in condo associations, such as buildings with shared elements, the insurance coverage differs. Typically, there are two types of condo insurance:
- Bare walls coverage: This type of coverage means that your condo association will be responsible for insuring the walls themselves and the internal systems like plumbing and wiring.
- All-in coverage: Going beyond bare walls coverage, all-in coverage includes protection for damaged fixtures, countertops, and other built-in items within your condo unit.
These distinctions in condo insurance ensure that both the structural and personal property aspects are appropriately covered based on the specific needs of condo associations.
HOA Insurance Glossary
Coverage: The extent of protection provided by an HOA insurance policy against specific risks and perils.
Premium: The amount of money paid by the HOA to the insurance company for maintaining insurance coverage.
Deductible: The amount that the HOA is responsible for paying out of pocket before the insurance coverage applies.
Claim: A formal request made by the HOA to the insurance company for compensation due to covered damages or losses.
Peril: An event or cause of loss that is covered by the insurance policy, such as fire, theft, or natural disasters.
Endorsement: An amendment or addition to the insurance policy that modifies or extends its terms and coverage.
Certificate of Insurance: A document that provides proof of insurance coverage, typically requested by third parties, such as vendors or lenders.
Liability Coverage: Insurance protection against claims or lawsuits brought against the HOA for bodily injury or property damage.
Property Coverage: Insurance that protects the physical structures, common areas, and assets owned by the HOA.
Expert Interview
To shed more light on HOA insurance in Florida, we interviewed Tyler Spaedt from Valley Insurance, an esteemed insurance professional with years of experience in the field. Here are some key insights from our conversation:
The current state of HOA insurance in Florida
As of right now, the Florida insurance market is in full crisis mode. The problem is truly derived from a capacity issue. Over the past few years, many carriers have pulled out of the state (over 10) . With recent legislation (such as tort reform) we have a goal to attract more carriers into Florida. Until then, we will continue to see some of the highest rates we have historically ever faced.
What are the most common types of insurance coverage options available for HOAs in Florida?
Essential for HOAs in Florida to have at the present time
- Property Insurance: Coverage that protects the physical structures, common areas, and assets owned by the HOA against various perils such as fire, theft, vandalism, and natural disasters.
- Directors and Officers (D&O) Insurance: Insurance coverage that protects HOA board members and officers against claims related to their decisions, actions, or omissions while serving in their official capacity.
- Crime Insurance: Insurance coverage that provides protection against financial losses resulting from dishonest acts, such as theft or embezzlement.
- Umbrella Insurance: Additional liability coverage that goes beyond the limits of primary insurance policies, providing an extra layer of protection against substantial claims or catastrophic events.
- Workers’ Compensation: Insurance coverage that provides benefits to employees who suffer work-related injuries or illnesses. It helps cover medical expenses, lost wages, and rehabilitation costs.
- General Liability Insurance: Insurance coverage that protects the HOA against claims of bodily injury or property damage caused by the HOA’s operations, premises, or products.
Insurance requirements or regulations that HOAs in Florida need to be aware of
When it comes to condominiums, they abide by Statute 718. Per Statute 718, your association needs to insure for full replacement cost. Right now, finding full replacement costs on older buildings, buildings located near the coast, and buildings with a lack of updates, such as roof/wiring is very difficult. Another requirement is crime coverage. Per statute 718, your crime policy needs to reflect all of the money in the association’s bank account. This includes reserves, standard funds, and any other cash the association may have on hand. With associations fully funding reserves & many construction projects, the crime limit often becomes a moving target.
Common challenges or issues faced by HOAs in obtaining insurance coverage in Florida
There are many factors that can deter or complicate your building from getting insurance.
- The first factor is the year it was built. Buildings built in the 1960s and 70s are going to be much harder to place, than a residence built in the early 2000s.
- The second factor is construction type. Frame construction in Florida is one of the hardest construction types to place. Often Citizens end up being the only carrier who will write certain types of frame construction risk.
- The third is the replacement cost. Larger buildings usually $30,000,000 or more in total insured value, often require multiple carriers to provide “layers of insurance”. Since there is not one carrier that can write some risk from the ground up, layering can often cause a dramatic increase in price.
- Last but not least, is the updates. In today’s insurance market, roofs are only supposed to last about 15 years before replacement. This is very interesting because most roofing companies are giving a 30-year plus warranty on their roofs. It is very difficult to comprehend the fact that insurance carriers know more about roofs than roofing companies, however, that is a discussion for another day.
Recent trends or developments in HOA insurance that HOAs in Florida should be aware of
A recent trend I have seen is dramatic increases in replacement costs. If your appraisal value is too low (on a price-per-square-foot basis) the carrier will often suggest their own replacement cost value for you. For example, most Joisted Masonry (concrete building/wood truss roof) condominiums are insured for 80-110 a square foot replacement cost. The carriers now want around $130 (+) per square foot. This means associations are receiving both large increases for rate and total insured value at the same time, this causes the largest increases.
Recommendations/tips for HOAs in Florida to ensure they have adequate insurance coverage
As a review, go to a knowledgeable agent who can provide a breakdown of your policy. With the ever-changing market and the insurance crisis we are in, another look or opinion goes a very long way. Find an agent who specializes in solely Association business just like we do here at Valley Insurance. A lot of associations right now either cannot afford or cannot find adequate insurance. It is our goal to make sure we can provide the association with what they can afford and help them through these truly troubling times.
Final points on HOA Insurance in Florida
Remember, HOA insurance serves as a safeguard against unforeseen risks. Consult reputable insurance providers, seek expert advice, and tailor your insurance to meet your community’s unique needs.
By staying informed, and selecting the right insurance coverage, you are protecting your HOA and ensuring its continued success.
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