If your condo or coop building is self-managed then you the board member is responsible for the shopping of the condo/coop associations master insurance policy. This article will guide you through the steps of shopping for your associations insurance.
Pre-Shopping
It is very important to re-shop your condo/coop master policy every year, rates change from year to year, and you have to make sure that you are getting the best deal out there.
Here are some stuff you should have ready when you re-shop you master insurance policy.
- Copies of your current declaration pages.
- 3 Year Loss-Runs from the prior carriers, and detailed information on any claim you had.
- Make sure to have all the information on the building. i.e. Year Built, Square Footage, Construction Type, Year Upgrades, Number of Stories and # of Units.
- If your building had any violations make sure to have the certificates that it was taken care of.
- A site plan or the condo/coop bylaws is always helpful
Once you have all the above info ready, it’s time to select the right insurance brokers. You should give it out to market to at least 3 insurance brokers, there is always something that one broker knows and the other one doesn’t.
Selecting the Agents
You should be very careful in selecting the right brokers that will work for you. Make sure that the broker has knowledge in the real estate insurance industry. Every insurance broker will want to write your buildings master insurance policy, but only a few are knowledgeable in the real estate insurance field. Find out which insurance brokers are the experts in real estate insurance in your area, and they should be the once to represent your condo/coop insurance needs.
Once you’ve decided on the 3 insurance brokers you want to use, it’s time to assign markets. What is assigning markets and why do I need to do that? The way it works in insurance is that once an agent submits a policy to an insurance carrier that carrier would be locked in for that broker and the company would not release any quotes to other insurance brokers. So how does this affect your condo/coop association? Not every broker has the same relationship with his underwriter, most of the time it depends on their book of business with the company. You should find out what the broker’s relationship is with the company and how big of a book he has with the insurance company. Assigning markets will also prevent one insurance broker from blocking out all markets so other brokers shouldn’t be able to approach them. If one insurance broker blocked a carrier without your permission and you feel that a different broker could do better you could always sign a BOR (Broker of Record) so the carrier should release a quote for the agent of your choice. Give them at least 90 days so they can negotiate coverage and pricing with the underwriters. Make a deadline when all the bids have to be in by (at least 30 days before you insurance expiration date), so you have enough time to present it to the rest of the board members and make the necessary changes.
Binding
Now it’s time to make a decision. Get all 3 bids together and start comparing coverage and pricing. Don’t just go to the last page on the bottom line and look at the total premium and whoever is a buck cheaper gets the deal, insurance has much more to it than just price (I’m not saying that price is not a big factor, after all insurance premiums make up the largest part of most condo and coop buildings expenses). Here are a few things to look for:
- Coverage comparison.
- Insurance carrier rating. Your insurance broker should provide that, or you can find it on AM Best Insurance Rating.
- Exclusions. Insurance carriers keep on adding exclusions to the insurance policies, talk to your insurance broker about if and what is excluded from your master insurance policy.
- Gaps in Coverage. Make sure that there is no gaps in coverage, the policy should cover everything that is owned by the condo or coop association. Make sure that all of the following coverages are included:
- Property Insurance
- Liability Insurance
- Umbrella Insurance
- Flood & Quake
- Building Ordinance
- Sewer Back up
- Boiler & Machinery
- Crime Insurance
- Terrorism
- Lead Paint & Mold Insurance
- Non-Owned-Hired Auto Insurance
- Assault & Battery
- 13. Directors & Officers Insurance (D&O)
Once you choose the policy that’s right for you, send a binding request IN WRITING to the insurance broker. Sign all the necessary paper work, have the broker set up policy financing if needed (most condo & coop master insurance policies are agency billed, which means that you have to pay the full premium up front, to avoid having to pay the full premium at once, you set up a policy financing), the interest rates are usually between 6 & 10%, they will only finance about 80% of the premium which means that you’ll have to pay about 20% upon closing. Let the broker know of any mortgagee clause that needs to be added. Don’t come running the last minute, give your broker enough time to process all paper work and set everything up efficiently.
Post Binding
Make sure to get certificates of insurance (COI) for all your policies. Make sure that all coverages are the same of what he had proposed, and make sure that the effective dates are correct. The broker should send you the actual policy in hard copy (this could sometimes take up to 30 to 60 days). The insurance company will usually come inspect the building within 30 days of binding, set a time for the inspection, and be there on time, this usually doesn’t take more that 5 to 10 minutes per building. Make sure to comply with any recommendations made by the insurance carrier.