Navigating HOA Insurance Increases Through Budgeting Strategies

If you’re an HOA board member, you’re probably aware of the insurance crisis hitting HOAs and condo communities across the country. And if you’re very, very lucky, your community hasn’t been impacted by it…yet. 

HOA insurance increases are happening country-wide for a number of reasons that your community cannot control. The tragedy that happened in 2021 in Surfside, Florida was perceived as a wake-up call for many insurance providers. As a result, fewer and fewer are insuring community associations, driving your rates through the roof with little to no recourse. 

Part of your job on the board of directors is the responsibility to act in the best interests of your membership. Going forward, that will mean having a difficult conversation about potentially steep association dues increases. The key to ensuring these conversations go smoothly is simple: a foolproof budgeting strategy.

Strategy 1: Explain the ‘Whys’

No matter what industry you’re in, no one wants to hear that prices are going up. One of the most effective tools in your budgeting strategy is to answer the burning questions about “why.” Why are prices going up? Why is insurance so expensive all of a sudden? Why aren’t we just finding new providers? Why are we adding so many repairs and inspections when we’re already paying our fair share?

Homeowners are not wrong to ask those questions. Having the answers prepped and ready will streamline the conversation, and help reinforce the Board’s position as community leaders who are only acting to ensure their safety long-term. Here are some basic answers to these common questions to get you started:

• “Why are prices going up?” 

Because the cost of HOA insurance is increasing dramatically, and we’re planning for the future to ensure we’re prime candidates for insurance providers going forward.

• “Why is insurance so expensive all of a sudden?” 

There are a lot of factors involved in this, like an increase in natural disasters, a condo collapsing in Miami, FL, and a lot of insurance companies refusing to insure certain businesses without a steep cost–this includes HOAs.

• “Why aren’t we just finding new providers?” 

Many providers are choosing not to renew policies or are leaving the state or area entirely. The number of providers remaining is getting fewer and fewer, making it a seller’s market, and giving insurance companies free reign to price how they see fit.

• “Why are we adding so many repairs and inspections?”

Many insurance companies are creating stricter requirements to get or maintain coverage, such as more frequent reserve studies or inspections or more comprehensive and consistent repairs. In an effort to get ahead of these requirements for the future, we’re budgeting to start meeting those needs as soon as possible so that our insurance coverage is never at risk of lapsing or being revoked.

Strategy 2: Explain the Benefits

HOA insurance increases means your board will have to reevaluate some of the current priorities. For many, this might mean proposing an entirely different budget than your community saw the year before. Be prepared to explain the high-level reasoning behind these choices, but when it comes time to look closely at what the changes are, sell the benefits hard.

Tying a specific cost increase to a specific benefit can go a long way in alleviating frustration about sudden price spikes in HOA dues. Let’s say the landscaping bill went up 20%. Not great at face value, but maybe it went up because of a newly planned upgrade to the community’s sprinkler system that will help manage and reduce water usage and keep utilities low. Showing how a cost now can lead to a cost mitigation down the line is a great incentive for homeowners to get onboard with a price increase. 

Strategy 3: Explain The Cost Analysis

It’s important to remind your membership that ongoing maintenance may be expensive and seem unnecessary at the moment, but it is the number one way HOAs can predictably reduce costs in the future. That sounds backwards, right? Your homeowners will certainly think so. Or they’ll think that it’s a problem for “Future Them” or maybe even “Future Owner of My House.” Getting homeowners to consider the far future is challenging and leads to the exact maintenance deferment that can now seriously impact HOA coverage eligibility.

Not only does continuing and preventative maintenance save on costs in the long run, it also protects the community from liability and keeps its members safe. Many unnecessary deaths, injuries, and lawsuits could have been prevented by simply maintaining the buildings and equipment within the community, such as the swingset in Nevada that permanently injured a teenager and ended in a $20m judgment against the association. 

Emphasizing not only the cost benefits but also the protection (both physical and monetary) that continuing maintenance provides may just be the most important conversation to have with your fellow homeowners. Showing them that their contributions now protect their future and protect their investment can be the difference between a shouting match and a begrudging approval of the budget. 

Strategy 4: Don’t Do It All Alone

As a volunteer board member, we get that this kind of conversation is not how you want to spend your evening. You joined the board to make an impact, not bicker about actually taking the necessary steps to make that impact. If your community is struggling under the weight of HOA insurance increases and needs assistance rallying the community around a more strategic budgeting plan, or creating that new strategic budget, we are here to help. At Foster Premier, we are committed to partnering with communities to navigate the new cost of HOA life. If you need the added support of a team of industry professionals with decades of experience in the HOA management business, contact us today for your free consultation.