Homeowners’ Associations (HOAs) across the United States are experiencing significant increases in insurance premiums, with some seeing costs double or triple upon renewal. Several factors contribute to this surge:

1. Natural Disasters: The frequency and severity of natural disasters, such as hurricanes, wildfires, and floods, have escalated. Combine with this the fact that populations have increased and now subdivisions stand where forests and fields were before, and combination is disastrous. These events lead to substantial claims, prompting insurers to raise premiums to offset potential losses. Tilchin Hall
2. Rising Construction Costs: Inflation has driven up the prices of building materials and labor. Consequently, the cost to repair or replace damaged property has increased, leading insurers to adjust premiums accordingly. Honeycomb Insurance
3. Increased Claims: A higher volume of claims, whether due to natural disasters or other incidents, results in greater payouts by insurance companies. To maintain profitability, insurers pass these costs onto policyholders through higher premiums. Clarks Simon Miller

Traditionally, opting for higher deductibles—where the policyholder agrees to pay more out-of-pocket before insurance coverage kicks in—has been a strategy to lower premium costs. This approach reduces the insurer’s risk, as the policyholder assumes a greater share of potential losses. However, in the current market, inflationary pressures and increased claim frequencies have led insurers to raise both premiums and deductibles. This dual increase ensures that insurers can cover the heightened costs associated with claims and maintain financial stability.

For HOAs, these rising insurance costs necessitate proactive measures. Regularly reviewing insurance policies, implementing risk management strategies, and exploring competitive quotes can help manage expenses. Additionally, engaging with insurance professionals to understand coverage options and potential cost-saving measures is advisable.

Some communities have been proactive and have reviewed the governing documents of their communities and found language that insurance companies see risk in. In these cases, changing the language to better protect the community as a whole from claims and shift some of the burden back to homeowners, especially in condominium and attached housing communities has become a strategy that has proven to lower premiums to a more reasonable level.

HOA Services USA offers advisory services just like this that can assist HOAs in working with their legal counsel to adjust governing documents in a manner that lessens risk to insurers and creates lower premiums for the community.