Coverage Corner is BACK!

I’m so excited to have the opportunity to continue writing this monthly newsletter and blog with Prendiville Insurance Agency.

For those of you who are new here, welcome!

And for those of you who were subscribing previously, welcome back!

Coverage Corner is intended to provide education, best practices, and useful information about insurance for common interest developments throughout California.

We’ll keep it short (because we know how busy you all are), keep it practical, and hopefully answer some of the insurance questions that come up again and again.

And please share! If you think an article would be helpful to a coworker, board member, homeowner, or anyone else involved with your community, send it their way.

Now, let’s get started.

It’s Budget Season. Where’s That Crystal Ball?

For many of you, it’s budget season, which means crystal balls are being actively consulted to figure out how much to budget for the next insurance renewal.
If only it were that easy.

Kidding aside, there are some things we do know and several steps managers and board members can take now to make the renewal process a little less mysterious.

Let’s start with one of the questions we hear most often.

1. Should You Increase Your Insurance Budget?

That one is easy.

Yes.

We’re still in what’s considered a “hard” insurance market. While you hopefully won’t see the dramatic increases we’ve experienced over the past couple of years, it’s still more likely that your premium will increase rather than decrease.

Why?

There are several factors still putting pressure on insurance costs:

• Inflation
• Increased costs for building materials
• Increased labor costs
• Higher replacement costs
• Increased reinsurance costs

That doesn’t mean every community will automatically receive a large increase.

In fact, if your association has made significant improvements to the property, make sure your insurance professional knows about them.

Replaced problematic electrical panels?

Completed major plumbing work?

Replaced an aging roof?

Addressed recommendations from a previous inspection?

Your premium may reflect that hard work.

The important thing is making sure the insurance carrier knows what you’ve done.

2. How Do We Best Prepare for Our Insurance Renewal?

This one is a little more involved, but it’s just as important.

The best time to start preparing for your renewal isn’t when the renewal proposal arrives.

It’s well before that.

There are several things your association can do to put itself in the best possible position.

Inspect Aging Infrastructure

If your community is 25 years old or older, make sure you’ve completed inspections of aging infrastructure, particularly major building systems such as:

• Roofing
• Plumbing
• Electrical systems

Even if you aren’t planning to replace these systems, having a recent inspection report can be extremely valuable.

And if that report confirms everything is in good condition? Even better.

That’s documentation your insurance professional can potentially use when presenting the community to underwriters.

If an inspection identifies work that needs to be done, don’t panic. Make a plan to address it and communicate that plan.

Showing an insurance carrier that the association knows about an issue and is actively working on it is much better than having the carrier discover the problem on its own.

Had Claims? Show What You’ve Done About Them

Past claims don’t disappear from your history, but you can demonstrate that you’ve taken steps to prevent similar claims from happening again.

Be proactive and document what you’ve done.

Depending on the type of loss, that might include:

• Newsletter articles educating residents
• Bulletin board postings
• Hydro flushing plumbing lines
• Replacing aging components
• Updating maintenance procedures
• Other loss-prevention measures

The goal is to be able to tell the carrier:

“Yes, we had this problem. Here’s what we’ve done to help prevent it from happening again.”

That’s a much better story than simply hoping the underwriter doesn’t ask.

3. Take a Look at Your Reserve Study

Here’s another document that’s becoming increasingly important during the insurance renewal process: your reserve study.

Carriers are almost always asking to review reserve studies now.

Pay particular attention to components showing “0 remaining useful life.”

Don’t have any?

Fantastic!

If you do, figure out why they’re there and how you’re going to address them.

If the component is still in good condition, determine whether the remaining useful life needs to be updated.

If it really does need replacement, be prepared to show that the association has a plan for completing the work.

Again, documentation matters.

An underwriter seeing “0 remaining useful life” with no explanation may reach a very different conclusion than an underwriter who receives documentation showing the component has been inspected and has additional useful life—or that replacement has already been budgeted and scheduled.

4. Google Your Own Community

This one may sound odd.

Go online and look at photos of your community.

Why?

Because you can bet the underwriters are doing it.

Underwriters—the folks who help determine your community’s eligibility and premium—have access to many of the same online resources everyone else does.

That means an old Google Street View image could potentially become part of the underwriting conversation.
If you find something outdated or something that needs an explanation, tell your insurance professional before you’re asked about it.

I’ve seen firsthand why this matters.

A few years ago, I had a community declined because the underwriter saw what appeared to be risky trees in the common area.

There was just one problem.

The trees had been removed more than a year earlier.

But they were still visible on Google Street View.

Once the underwriter had seen those images and made a decision, it was difficult to change their mind.

The lesson?

Take a look at what an underwriter might see online and get ahead of anything that doesn’t accurately represent your community today.

5. Know What You Can—and Cannot—Control

There are a lot of factors that determine a community’s insurance eligibility and premium.

Some are within your control.

Others aren’t.

You can’t change where your community is located.

You can’t change the year your buildings were originally constructed.

And unfortunately, both can play a significant role in how insurance carriers evaluate your association.

So don’t spend all your energy worrying about the things you can’t change.

Concentrate on what you can.

Managers and board members can work together on:

• Preventive maintenance
• Regular property inspections
• Aging infrastructure
• Loss-prevention measures
• Thorough documentation
• Reserve planning
• Appropriate insurance budgeting
• Clear communication with insurance professionals

Those are the things you can control—and they’re the things you should make sure your insurance carrier knows about.

Don’t Wait Until Renewal Time

If there’s one thing I’d like you to take away from this first Coverage Corner, it’s this:

It is never too early to start thinking about your insurance renewal.

Don’t wait until you’re a few weeks away from renewal to discover that an underwriter wants an inspection report, has questions about your reserve study, or found an outdated photo online.

Start preparing early.

If your community needs ideas for preparing for an upcoming insurance renewal, let me know.

And if you’re a community manager who needs some help communicating the importance of all of this to your board members, please reach out.

The Prendiville Team is here for you.

And with that, welcome—or welcome back—to Coverage Corner!

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