With earthquake insurance premiums skyrocketing, it is critical to get the best value possible for the money you are spending.

I am going to give you five ways to be able to obtain the best possible alternative insurance solutions for your association.  There are more, but this should get you thinking about the optimal way to structure your association’s needs.

1. TRADE IN YOUR LOW DEDUCTIBLE
   That’s right.  If your association is carrying a deductible of less than $50,000 per unit, you probably do not have the best value for your association.

   Each unit owner can purchase CEA loss assessment coverage of $50,000 with a $7,500 deductible.  This coverage costs between $30-120 per year. (For your exact cost go to www.earthquakeauthority.com  and use their calculator.)

   Now, the association, instead of purchasing coverage from the first dollar, will set the association’s deductible at $50,000 per unit.  The further away from the first dollar of coverage the association is, the cheaper the cost of insurance will be in those areas that have sufficient capacity.  For those areas where getting coverage at any price is a problem, this provides a way to eliminate holes in your coverage.

   This is good strategy for many associations.  Safeguards need to be put in place to make sure it works properly and there are exceptions that may make this not workable for your association.  I would be happy to assist you in evaluating if this is an appropriate strategy for your association and show you how to put the safeguards in place.

2. PROPER LIMITS OF COVERAGE
   The amount of coverage necessary to properly insure your association is dictated by your association’s CC&R’s because it lays out who is responsible for insuring which portions of your building.  Almost all earthquake policies will refer to the association’s CC&R’s by stating that the policy will provide coverage for that which the association is responsible for insuring.  If the association’s CC&R’s state that the unit owner is responsible for insuring the interiors of their units, then the association only needs to have sufficient coverage to replace the common areas. If the association is purchasing limits that reflect full coverage of all improvements, the association may be purchasing as much as 35% more insurance than it needs to in order to properly insure the property.

   If your agent has not reviewed your CC&R’s or has read them inaccurately, then it is probable that your coverage does not reflect your actual needs.  Few agents understand how to properly read CC&R’s so they can write coverage that accurately reflects them.

3. SPECIALTY PROGRAMS
   97% of the alternatives that will write earthquake insurance are the same alternatives that any good agent will have access to.  The other 3% however, could make all the difference in the world.  There are specialty programs that only appoint a very few select agents they know they can trust.  These alternatives can provide for a creative solution or part of one that your current agent just can’t give you.  It will make all the difference in the world if your agency is having problems placing coverage for earthquakes.

   As experts in association insurance, we have two such programs that we use to help our clients place coverage that others just don’t have.

4. RETROFIT YOUR BUILDING/ENGINEERING STUDY
   If your building was built prior to 1969, you may need to look at having an engineering report done and possibly retrofitting your building to comply with current earthquake codes.  Many buildings of this vintage are now looking at spending in excess of $100,000 for less than $5,000,000 of coverage. By taking these steps you may find that alternatives that are half the price are now available to you that were previously were not.

   An engineering report will state what the PML (Probable Maximum Loss) is for your association.  If the study comes back favorably, then some alternatives will accept this instead of their own software risk modeling programs.  These will cost a couple of thousand dollars, but may end up saving you thousands.  If the PML study shows that the building has a low PML, you may be able to get a company that would otherwise decline your risk to now approve it.

   If the engineering report shows that you have excessive exposure to loss, then the following step will be necessary. The report will normally provide you with a list of items that you can do to retrofit your building and bring it up to current earthquake codes.  This will cost the association money, but it will end up saving you thousands on your insurance now and in the future. In addition the association now has a much more structurally safe and sound building.

5. SHOP FOR AN AGENT – NOT A POLICY
   All of the alternatives for earthquake insurance will only talk to one agent.  In this arena you are hiring a professional, just like any of the other professional that your association uses.  You wouldn’t have three different reserve study firms do reserve studies and purchase the one you like most. Don’t do this with your insurance agent.  Interview your agent, confirm his credentials, check his references, and then select the one that you believe will do the most professional job on your behalf.

   What you should be looking for:

• Does he understand condos?  Is the agent properly reviewing your CC&R’s to make sure that you are purchasing the right coverage?
• Does the agent understand how to use all of the variables to create the optimal solution with the alternatives that are available?
• Does the agent have access to the right markets?  If you are using a captive or semi-captive agent (such as an All State, Farmers, or State Farm), you are probably going to miss alternatives that you need to have presented. You need an independent agent that specializes in association insurance.
• Does your current agent provide expert advice similar to the advice I am laying out here and in my other reports on my website?  You need guidance.  If all that your current agent is providing is a price and a policy, beware.

As experts in condominium associations, we would be happy to discuss how we can be of assistance to you and help make the difference in how your association is protected. If you think this is the type of  representation that you and your association deserves, you can call us at 888-664-3276 or click the button below to email us and we will be happy to assist you.