Condo Media - February 2021 - 21

l What is going on with deductibles?
Deductibles may seem like a very
straightforward consideration,
however some of the most common
mistakes in condo insurance involve
misunderstandings surrounding this
topic. There are many different types
of deductibles that may impact an
association's property policy, and
it's possible (even probable) that
a single property policy features
different deductibles for different
causes of loss. For example, an " all
other peril " deductible will generally
address what most view to be the
most commonly considered claims,
such as a fire, water damage from a
burst pipe or other plumbing issue,
etc. That said, if optional coverage
areas such as earthquake or flood are
selected, these limits typically come
along with separate deductibles that
apply specifically to these hazards.
If your property is close to the coast,
a specific (and higher) deductible
may apply with respect to wind/hail,
named storm, or hurricane-related
damage. Finally, many carriers will
often offer " per unit " deductibles as
a way to control master policy claims
(and the resultant annual cost);
these types of deductibles can be a
powerful tool if used correctly (i.e. in
conjunction with properly structured
HO-6 unit owners' policies), however
if used incorrectly, can result in some
painful and expensive situations.
PAYING INSUFFICIENT
pitfall
ATTENTION TO
AREAS OF COVERAGE
OTHER THAN PROPERTY
It's natural for those who handle an association's insurance program to focus
on property insurance - after all, the
property itself often represents one of
the unit owner's largest personal investments. That said, it's also important to
consider other areas of insurance that
round out any properly structured master insurance program. Other areas of
coverage that an association should be
sure to discuss with its broker include
the following:

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While price is obviously a very important factor to consider
when buying insurance, if it's the only factor, the likelihood
of encountering problems with coverage increases.
l General Liability
l Auto Liability
l Workers' Compensation &
Employers' Liability
l Umbrella Liability
l Employee Dishonesty/
Fidelity Bond
l Management Liability (Directors' & Officers' Liability and
Employment Practices Liability)
Each of these coverage areas
addresses a different set of risk
exposures to the association, and
failure to adequately address the
need for coverage can result in
inconvenient situations.
MISUNDERSTANDING
THE PROCESS
Those who do not have
much experience with
the process of procuring insurance for
a community association very often
overlook - or improperly weigh - key
considerations that dramatically
impact the outcome. For example,
while price is obviously a very important factor to consider when buying
insurance, if it's the only factor, the
likelihood of encountering problems
with coverage increases. The aforementioned optional coverage areas

5

pitfall

come at an additional premium charge;
if the only thing that board members
or association management are considering at renewal time is the " bottom
line " without delving into the details
of coverage, it's possible that the utility
of that low price will subsequently be
outweighed by the pain of an uncovered or inadequately covered claim.
Association management should find
a reputable insurance broker who is
knowledgeable and experienced in
the area of community association
insurance, and then work with that
broker to collaboratively structure
coverage that is tailor-made for the
specific community.
PREPARING FOR
THE UNEXPECTED
" I'm planning on experiencing an
insurance claim this year, " said nobody,
ever. While the process of buying
insurance may not be the most exciting
thing on an association manager's " to
do " list, it is undeniable that paying
proper attention to this process pays
dividends in those unexpected scenarios that result in claims.
n GREGORY G. PIERCE, CPA, LIA,
IS SENIOR VICE PRESIDENT
AT NORTHSTAR INSURANCE
SERVICES, INC.

February 2021 CONDOMEDIA

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Condo Media - February 2021

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