Insurance Essentials for Community Associations: Protecting Your Community with Confidence

Navigating insurance policies for your Community Associations can be overwhelming. Here are some key considerations when reviewing your association’s insurance policies:  

1. Don’t Ignore the Small Premium Policies! While property insurance often dominates the budget and gets the most attention, reviewing smaller policies’ terms, conditions, and coverages is critical. Lines of coverage outside of property insurance can include valuable protections for your association—or leave significant gaps if not adequately understood. The best practice is to evaluate, in-depth, annually, what is included and excluded and notify your broker of any changes, such as a new appraisal or the modification to the property. 
2. No Two Policies are Identical: A thorough comparison of the policies is essential to ensure that unexpected limitations don’t catch your association off guard.  “No two policies are identical and comparing the coverage forms is critical, especially in General Liability.” Says Andrea Northrop, Esq. of Patriot Growth Insurance Services.  “A mentor of mine liked to say that the “standard” General Liability ISO form is 16 pages long. Anything more than that is likely altering or reducing coverage provided in the first 16 pages. “ 
3. The Truth About Flood Insurance: Flood insurance is not included in standard property insurance policies, making it a self-insured risk for many associations. A common misconception is that being outside a “mandatory” flood insurance zone means no risk. However, all of Florida is considered a flood zone, and over 20% of flood claims come from areas not designated as special flood hazard zones. Understanding your exposure to flood risks and considering supplemental flood insurance is crucial.
4. There’s No Such Thing as Full Coverage: No single insurance policy covers everything. Every policy has exclusions, whether it’s property, liability, or directors’ and officers’ insurance. It’s vital for board members to recognize these limitations and address gaps through supplemental coverage or risk mitigation strategies. 
5. Understand Deductible Applications: Deductibles, particularly hurricane deductibles, can be confusing and financially significant. These are often expressed as a percentage, but the real impact comes when that percentage is applied to the total insured value. For example, a 5% hurricane deductible may sound manageable until it is calculated on a multimillion-dollar property. Ensure your association has a clear plan in place for covering deductible costs when disaster strikes. 

Being proactive and thorough in your Community Associations insurance review can save your community from financial hardship and unnecessary stress. By understanding the nuances of your policies and planning for potential risks, your board can ensure your community’s long-term security and well-being. 

To learn more about how Castle Group can serve your community, request a proposal by visiting https://castlegroup.com/request-a-proposal/.  

This article was created with insights from Andrea Northrop, Esq., Principal of Patriot Growth Insurance Services.