insurance
What determines insurability?
The likelihood of a disaster determines its insurability and, in effect, plays a key role in the cost of the policy. Like every company, the goal for an insurance company is to make a profit. The way insurance companies do this is by receiving more money from investments and policy premiums (a premium is the fee for an insurance policy) than what it costs to payout claims, as well as the general expense of running an insurance company.
What it comes down to is the calculable level of risk surrounding any event. Several factors determine this percentage of probability. The professionals that perform this assessment are called actuaries. These actuaries examine similar policies for that loss, how frequent the loss occurs, how significant the loss is, and finally the payout to the policy holders as a result of this loss- this process of determining the level of risk is called risk management. This data is processed and adjusted for current-day value to determine the premium for the holder. The process of producing the cost of this premium is called underwriting.
Typically, the more likely an event is to happen, the more expensive a policy will be. This means that if an association has a history of frequent loss, a premium could be higher. Bear in mind that insurance companies may cancel policies if necessary maintenance is neglected or if there are too many claims filed within a certain period of time. In fact, if neglected maintenance leads to a loss, this could disqualify you from receiving a payout for any claim filed for this loss. An example of this would be a roof that has not been inspected or updated in several years, and collapses as a result; because it is the homeowners responsibility to maintain the roof, fault for the loss falls onto the owner. This is determined after the claim is inspected for authenticity.
Adjusters are the individuals who inspect and settle these claims. They would be the ones to decide if the claim is legitimate or if the loss that has occurred was the fault of the policy holder or a third party- or if the loss was deliberate, in which case the ordeal may become a legal case, as this could indicate an attempt at insurance fraud. These adjusters may be a part of the insurance company, an independent adjustment agency, or could be a public adjuster. These are professionals that assist people in presenting their claims to insurance agencies. As you can guess, a more accurate premium price can be acquired by contacting an insurance provider and obtaining a quote. For more information regarding insurance, refer to our resource articles.
What does Homeowner Association’s insurance cover?
There are a wide range of items that can be insured and policies that cover your interests and property. Homeowner associations generally lump insurance fees in with the assessments that are paid by homeowners who reside in that HOA. These fees may run anywhere from a few hundred dollars to over a thousand dollars. This policy will usually include coverage for common areas and shared spaces.
As is often the case, insurance is dependent upon the type of domicile you live in. For individual properties, the association’s insurance will probably cover very little, except for any power lines, water lines, pathways, driveways, or anything else that falls under the ownership of the homeowner association. For property owners, most of the responsibility to insure your home and belongings fall unto the individual. This is not always the case for condos and townhomes; insurance would usually cover the exterior of the building containing all the units, being that it is property of the community developer/association. Sometimes, this coverage may even extend further, covering repairs to walls and floors. Of course, in the event of something happening to the integral structure of the building, such as a fire, the association would need to file a claim in order to remedy that disaster. However, the interior of a unit usually falls under the same standards as an individual home; everything inside the residence is the responsibility of the tenant or owner to insure.
Homeowner association insurance does not stop there, however. It is also quite common, and often necessary, for board members to be covered by a policy known as D&O (directors and officers) insurance. This policy covers board members and representatives of the association, although it may specifically exclude certain roles. Unfortunately, there is not a policy for everything. Unpreventable and unpredictable events, also known as “acts of god,” are non-insurable because the risk cannot be assessed. These could include earthquakes, floods, acts of war, acts of terrorism, radioactive contamination, sinkholes, etc. This is not to say there is no way be covered for these incidents, but unique policies would need to be made and implemented, usually accompanied by high premiums. Never be afraid to reach out to your insurance provider, through your community manager or board of directors if needed, to find out exactly what your association’s insurance covers and, more importantly, what it does not cover. For more information on homeowner association insurance, examine our resource articles.
