Budgeting for Your 2025 Condominium Association Insurance Renewal

By Star Hebig, CRM, CIC, CRCMP, CASP, BSF, CAM / Published August 2024

One of the essential responsibilities a board carries is to make sure their association is adequately insured and properly covered to protect against various risks, losses, and liabilities. Managing insurance renewals effectively involves strategic budget planning with a trusted agent who can help forecast premiums. With over 35 years’ experience insuring associations in Florida, I have seen this insurance premium cycle many times. The industry goes years without any major wind event, and premiums remain stable and may even decrease, so there are many insurers competing to write your association insurance at a reasonable rate. Then a couple of hurricanes barrage Florida resulting in limited carriers, tighter underwriting guidelines and skyrocketing premiums; and in some cases, Citizens becomes the only option.

     Condominium associations in Florida must navigate a complex landscape of insurance challenges shaped by environmental risks, regulatory requirements, and limited carriers to provide coverage. The primary considerations affecting rates include age and condition of buildings—particularly the roof, the geographical location of the condominiums, proximity to coastal areas prone to hurricanes and tropical storms, combined with the coverage limits and deductibles chosen by the association—that all play crucial roles in determining insurance costs. Changes in the underwriting guidelines for Fannie Mae and Freddie Mac mortgages, capped the maximum wind deductible in Florida at five percent, which added to the already unprecedented high rates.

Understanding the Importance of Proper Insurance Coverage

     Insurance for condominium associations typically covers common areas, structures, liability protection, and potentially other specialized coverages depending on the association’s specific needs. The goal is to mitigate financial risks associated with property damage, legal liabilities, and other unforeseen circumstances that could impact the association and its residents. Be sure to carefully review policy exclusions and coverage limits so there are no surprises when filing a claim. Understanding what is and isn’t covered prevents gaps in coverage that could leave the association vulnerable.

1. Identifying Key Insurance Types
   • Property Insurance—Covers physical structures and common area amenities against risks like fire, lightning, windstorms, hurricanes, collapse, vandalism, and natural disasters.
   • Liability Insurance—Protects against lawsuits for injuries or damages that occur on the common property.
   • Directors and Officers (D&O) Insurance—Provides coverage for board members against claims related to their decisions and actions on behalf of the association.
   • Fidelity Bond Insurance (Crime)—Protects against theft of association funds.
   • Flood Insurance—Essential in all of Florida since property policies exclude flood damage and wave action.
   • Umbrella Coverage—Provides an additional limit of liability coverage if your primary coverage is exhausted. Additional coverage may also be extended to the D&O policy.
2. Assessing Coverage Needs Annually—Condominium associations should conduct a thorough assessment of their insurance coverage annually and when major changes occur (e.g., renovations, additions, policy changes). This includes reviewing your building values. Every association is required by Florida Statute 718.11 to obtain an insurance replacement appraisal every 36 months. The insurance carriers use these values as a guideline to determine the amount of insurance an association needs. These appraisals should be carefully reviewed to identify any errors, such as square footage, incorrect building construction, or roof age. Any error in the appraisal can have a major impact on the appraised value, which in turn impacts the insured value and premiums. Property insurance values are based on the appraised value, so it needs to be accurate.
3. Review Past Claims and Risks—Analyzing the association’s past insurance claims helps identify recurrent events. Carriers look at frequency and severity when determining eligibility and insurance rates. Proactively reviewing losses and putting a plan in place to mitigate future losses can be very instrumental in rate determination.
4. Budget for Premium Increases—Insurance premiums can fluctuate due to various factors such as claims history, market conditions, and property valuation changes. Associations should discuss with their agent the anticipated potential rate increase based on their unique details.
5. Communicate with Residents—Keeping residents informed about insurance coverage, including who covers what, fosters transparency and ensures they understand their own responsibilities for personal insurance. Have your agent host an educational seminar for the residents to explain the association’s responsibilities vs the owner’s responsibilities and address questions before a claim arises.

     Properly budgeting for insurance renewals and ensuring adequate coverage and appropriate limits are critical aspects of managing a condominium association’s budget. By understanding insurance needs, budgeting effectively, and regularly reviewing policies, association boards can protect their association property and provide peace of mind to residents. Working with an agent who specializes in association insurance will keep you informed about industry trends, regulatory changes, and tips and tricks to help you navigate Florida’s insurance challenges successfully. 

Star Herbig, CRM, CAM, CIC, CRCMP, CASP, BSP

President, FCA Insurance

     Star’s entire professional career has been dedicated to the insurance field. With a bachelor of science degree in business finance and a lifetime in the insurance arena, Star is recognized as a highly ethical professional with unmatched experience and skill at customizing insurance plans for inland and coastal associations. Her concentration on insuring associations has made her an expert in the complexities of insuring condominium and homeowner associations. She has earned the prestigious Certified Risk Manager (CRM) designation, which only a few obtain. In addition, she has earned the professional certification of Community Association Service Provider (CASP) and is a state-certified community association manager (CAM) continuing education trainer. Star loves educating boards, property managers, and residents and helping them understand insurance needs. For more information, call 407-920-1116 or email Star@CallFCA.com.