Homeowner Associations » Commercial Property

Commercial Property Insurance: Frequently Asked Questions


Question: How long does it take to get a quote?

Answer: Unlike auto insurance, each association is different so there is no standard of risk. Therefore, each commercial property submission is reviewed independently and rated individually. Typically, steps include property inspection, applications, submissions to markets, review of place history, and release of the quote. The entire process should take 20-30 days to complete.


Question: Does my association need to maintain Property Coverage?

Answer: Yes. All Lenders require it. Without it, no units will be sold or refinanced. In addition, it is just a wise decision to obtain insurance. Most people will not be able to rebuild should their unit be destroyed or damaged, and insurance allows security should a catastrophe hit.


Question: My Association had no claims, why did our premium increase this year?

Answer: Unfortunately, claims are just one factor considered by a carrier to determine an association’s premium. Claims paid out on an entire class of business can have an effect as well. For example, if there is a large catastrophe, such as a hurricane or earthquake, the carrier must make up for the claims they pay out, whether or not your particular association was involved.

Another factor not often considered is the Stock Market. An Association’s premiums are reinvested by the insurance company during the policy term, and the returns on those investments are used to keep the premiums low. If those returns are poor, it may cause the rates to change.


Question: How do I keep my premiums as low as possible?

Answer: Most importantly, show the carrier you are not a risk. Prevent claims and be proactive. Inspect the premises for trip-and-fall hazards and eliminate them. Replace worn components to prevent a future claim. Keep the Association well-maintained. Also, accepting a higher deductible amount will lower the premium.
Will the policy pay for the entire damage, even if it is higher then the limits on the policy?
Not typically. Most carriers will only pay up to the loss limit of the policy after the deductible. This is why it is imperative to have the correct limits and be insured for the full replacement cost of the property.


Question: How do I know if I am insured to the full replacement cost?

Answer: Insurance brokers and carriers are not appraisers, nor do they warrant adequacy coverage. The only way to make absolutely sure you are insured for the correct amount is to have an independent appraisal firm out to the association.


Question: I paid $500,000 for my unit, but according to the insurance policy, the limits, when divided by the number of units, only equates to $250,000. What gives?

Answer: Market value is not the same as replacement cost. When re-building a unit, there is no consideration taken for land value.


Question: Why is my carrier non-admitted? Are they disreputable?

Answer: Many times a broker just cannot place coverage with an admitted carrier, and must look to non-admitted carriers as replacements. Non-admitted carriers are just as reputable as admitted carriers, having to pass similar rigorous rules and regulations within the state they are admitted in (a non-admitted carrier may not be admitted in California, but is typically admitted in another state)


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