By Devon Schad, Schad Agency
For community associations, managing insurance costs can be a challenging but crucial task. Focusing on maintenance, replacement, and risk mitigation can significantly impact insurance premiums especially when dealing with separate carriers for property and general liability insurance. Below, we explore strategies for community associations to proactively maintain and replace key elements, ultimately reducing the risk of insurance claims and maximizing cost savings.
Property Insurance: A Costly Focus
Property insurance constitutes the most significant portion of an association's insurance expenses. To optimize cost savings, it's essential to concentrate efforts on reducing losses. However, some carriers bundle general liability and property insurance together, making it crucial to tailor strategies accordingly.
Maintenance Tips for Property Insurance:
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Educating Owners:
- Educate unit owners on the lifespan of appliances, such as hot water heaters, and recommend replacement before reaching the end of their useful life.
- Encourage owners to maintain a minimum temperature of 55 degrees during winter to prevent frozen pipes.
- Advise residents to turn off water when leaving for vacation to minimize potential water damage.
- Educate owners on useful safety information like how to put out a grease fire.
- Keep grilling away from buildings to reduce the risk of fire-related losses.
- Regular Maintenance Tasks:
- Emphasize the necessity for owners to perform routine tasks like cleaning dryer vents, replacing water lines with refrigerators, cleaning fireplaces, replacing filters, and ensuring smoke detectors are in working order.
- Association should routinely inspect roofs, plumbing systems, fire safety systems, shared HVAC systems, and the like.
- Explore the installation of advanced water monitoring devices and systems capable of issuing timely alerts in the event of insufficient heat in collectively-owned structures.
General Liability: Mitigating Risks
While property insurance focuses on physical structures, general liability insurance addresses potential accidents and injuries within the community. To minimize liabilities and associated insurance costs, community associations should implement proactive measures.
Maintenance Tips for General Liability:
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Infrastructure Inspection:
- Conduct regular walkthroughs to identify potential liability risks within the community.
- Repair uneven sidewalks, cracks, or holes in roadways, driveways, and walkways to prevent accidents and potential claims.
- Provide ice melt in problem areas or convenient locations during winter months.
- Informing and Warning Residents:
- Clearly communicate snow removal procedures and areas to avoid due to icy conditions.
- Utilize warning signs for potential hazards, such as icy surfaces, no swimming signs or stay off the ice for ponds or water areas.
Risk Mitigation Strategies:
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Post-Insurance Loss Actions:
- Analyze previous insurance claims and losses to identify patterns and potential areas for improvement.
- Implement measures to prevent recurring incidents, such as adding insulation to areas prone to frozen pipes.
- Shifting Loss Exposure:
- If allowed by CC&R's/CCIOA, consider shifting deductible cost to losses caused by owners.
In the dynamic landscape of community associations, a strategic focus on maintenance, replacement, and risk mitigation can lead to substantial insurance savings. By educating and engaging residents, addressing potential liabilities, and proactively managing risks, associations can create a safer and more cost-effective living environment for everyone involved. Ultimately, the effort invested in preventative measures will not only result in financial benefits but also contribute to the overall well-being of the community.
Devon Schad, currently serves as the Vice President of the Board of Directors for the CAI Rocky Mountain Chapter and is a CAI Educated Business Partner. Beyond his board position, Devon is the visionary owner of the Schad Agency, a family-owned business that has been at the forefront of the insurance industry since its establishment in 1976. As an expert in his field, Devon is instrumental in crafting insurance language for CC&R's, contributing insightful articles to the industry, and imparting knowledge through teaching certified CMCA classes.
