Three Steps to Minimizing Insurance Premium Hikes
As a follow up to our last article, this entry details a few things that homeowner associations can do to manage their insurance policy premiums -- especially as annual policy premiums continue to spiral upward.
(1) Consider taking a higher deductible. One way to manage fluctuations in premium is to request a higher deductible from your insurance carrier. Generally, there is an inverse relationship between the premium paid versus the deductible paid on any given policy (since the association is basically taking on more liability via the deductible for any claim made against it under the policy). One caution though: before you start raising the deductible on your polic(ies), make sure to review any claims made against them in the past few years (a 5-year period should be sufficient) and compare the savings resulting from the lower premium versus the chance that if a new claim is made, the association will have more exposure based on the higher deductible. More often than not, the association will save money by raising the deductible if the association’s incident rate for claims can justify the move.
(2) Review your coverage limits. Many associations are “overinsured.” From a practical perspective, the more coverage the association has, the bigger the target for a plaintiff to attack. While it is equally undesirable to “underinsure” an association, review your association’s coverage(s) and make sure they are commensurate with replacement cost for all insurable property held by the association.
(3) Don’t be afraid to shop around. Loyalty to one company or agent is fine provided that the association is getting a good value for the money spent. But don’t be afraid to shop around and rate-check from time to time, especially if you haven’t had any claims against the policy lately – you just might find that the competition for your business from reputable agencies will lower the total cost of owning that insurance by just placing a few phone calls. Above all though, make sure that whatever carrier you choose to do business with possesses a high rating or grade, which indicates, among other things, the financial health or stability of any given insurance company.
*Thanks to Community Association Management Insider, June 2002 edition, from which excerpts of this article originated.
(1) Consider taking a higher deductible. One way to manage fluctuations in premium is to request a higher deductible from your insurance carrier. Generally, there is an inverse relationship between the premium paid versus the deductible paid on any given policy (since the association is basically taking on more liability via the deductible for any claim made against it under the policy). One caution though: before you start raising the deductible on your polic(ies), make sure to review any claims made against them in the past few years (a 5-year period should be sufficient) and compare the savings resulting from the lower premium versus the chance that if a new claim is made, the association will have more exposure based on the higher deductible. More often than not, the association will save money by raising the deductible if the association’s incident rate for claims can justify the move.
(2) Review your coverage limits. Many associations are “overinsured.” From a practical perspective, the more coverage the association has, the bigger the target for a plaintiff to attack. While it is equally undesirable to “underinsure” an association, review your association’s coverage(s) and make sure they are commensurate with replacement cost for all insurable property held by the association.
(3) Don’t be afraid to shop around. Loyalty to one company or agent is fine provided that the association is getting a good value for the money spent. But don’t be afraid to shop around and rate-check from time to time, especially if you haven’t had any claims against the policy lately – you just might find that the competition for your business from reputable agencies will lower the total cost of owning that insurance by just placing a few phone calls. Above all though, make sure that whatever carrier you choose to do business with possesses a high rating or grade, which indicates, among other things, the financial health or stability of any given insurance company.
*Thanks to Community Association Management Insider, June 2002 edition, from which excerpts of this article originated.
posted by William G. Gammon at 3:53 PM
William G. Gammon
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