I wrote a response and had AI rewrite and add points. Here it is:
Don't Just Shop for a Lower PremiumāReduce Your Risk
I'm assuming you are a condominium association that has property insurance covering the common elements and at least some portion of the condominium units. In many states, this type of coverage is required by law or by the association's governing documents. If you give us more information about your situation and state, people may be able to give you more specific advice.
There are several things a condominium association should consider when insurance premiums are increasing.
1. Prevent claims in the first place.
The best insurance claim is often the one you never have.
Consider installing automatic water-leak detection devices, particularly in locations with a history of water losses. Some systems can detect leaks and automatically shut off the water. Ask your insurance carrier whether the particular system qualifies for an insurance discount, but even if it doesn't, preventing a major water loss may save the association far more than the cost of the equipment.
Also make sure the association is keeping up with basic risk-management measures, including required smoke alarms, fire extinguishers, fire protection systems, electrical inspections where appropriate, and maintenance of roofs, plumbing, heating systems, and other components that can cause significant claims.
2. Pay particular attention to vacant units.
A vacant condominium can be a significant insurance risk because a small plumbing leak can continue for days or weeks before anyone discovers it.
If owners leave their units vacant for extended periods, the association should consider requiring periodic inspections. The association may also want rules requiring appropriate winterization and maintenance of heat during cold weather.
Owners should understand that their individual insurance policy may also have requirements concerning vacancy or unoccupied units. The association should coordinate its requirements with its insurance agent.
3. Review your deductible.
One of the most effective ways to reduce the association's insurance premium may be to increase the deductible.
A higher deductible is essentially a decision to retain more of the risk rather than paying the insurance company to assume that risk. The association still maintains insurance for major losses, but it is responsible for a larger amount before insurance begins paying.
However, don't simply raise the deductible without considering how the deductible will be paid after a loss.
The association should review its governing documents and applicable state law to determine whether a master-policy deductible can be charged to an individual owner, allocated among owners, or must be paid from association funds and potentially recovered through a special assessment.
4. Review your governing documents before changing the deductible.
Some condominium declarations or bylaws contain provisions specifying maximum deductibles or requiring particular types of insurance coverage.
If your governing documents contain outdated deductible requirements, the association may want to consider amending them rather than simply adopting an insurance policy that conflicts with the documents. Otherwise, you could potentially create an unnecessary dispute after a major loss.
Don't assume the Board can simply ignore a provision in the declaration because the insurance market has changed. Have your attorney and insurance professional review it.
5. Make sure owners understand the consequences of a large deductible.
Suppose your association has a $100,000 deductible and suffers a $500,000 covered loss. The insurance company may pay $400,000, leaving the association responsible for the first $100,000.
Where does that $100,000 come from?
It could potentially come from association reserves, operating funds, a special assessment, or an assessment or charge against one or more owners, depending on your documents and state law.
Owners should understand this risk before the association adopts a very high deductible.
I would strongly encourage owners to discuss loss assessment coverage with their individual condo insurance agent. This coverage can, depending on the policy, help pay an owner's share of certain assessments resulting from a covered loss or other insured event. Owners should specifically ask their agent about the amount of coverage, the applicable deductible, and whether it applies to an assessment arising from the condominium association's master-policy deductible.
6. Don't assume the association's master policy covers everything.
The Board should have its insurance agent explain, in plain English, exactly where the association's coverage ends and the individual owner's HO-6 policy begins.
Depending on the governing documents and the state's condominium law, the master policy may cover the building and common elements but have limitations regarding improvements, betterments, fixtures, flooring, cabinets, appliances, personal property, and other items inside a unit.
Owners should be requiredāor at least strongly encouragedāto carry appropriate individual condo insurance and adequate liability and loss-assessment coverage.
7. Review coverage, not just the premium.
When comparing insurance proposals, don't simply choose the company with the lowest price.
Look at the deductible, wind and hail deductible, replacement-cost coverage, ordinance-or-law coverage, water and sewer backup coverage, equipment breakdown coverage, exclusions, sublimits, and other important provisions.
A lower premium accompanied by substantially worse coverage may not be a bargain.
8. Work with your insurance broker on loss history.
If the association has had frequent claims, the Board should ask the broker what types of losses are driving the premiums and what specific steps would help reduce future losses.
In some circumstances, filing a relatively small claim can have consequences beyond the amount of the immediate payment, particularly if the association develops a poor claims history. That doesn't mean an association should fail to report a legitimate claim or violate its policy. It does mean the Board should understand its policy's reporting requirements and discuss claims strategy with its insurance professional.
The overall goal should be risk management, not simply insurance shopping.
A condominium association can often do more to control its long-term insurance costs by preventing water and fire losses, maintaining the property, managing vacant units, educating owners, and structuring an appropriate deductible than by simply looking for another insurance company every year.
And before making a significant change to the deductible or insurance requirements, I would have the Board's insurance professional and attorney review the governing documents and applicable state law. Insurance and condominium deductible rules vary considerably from state to state.