Homeowner Association Insurance - What you need to know
As you may know, homeowner associations in California are required by law to have certain minimum levels of insurance and coverages. However, not all associations are adequately covered creating a huge liability for board members and other owners of units. In addition to the HOA, each unit owner should carry their own individual homeowner insurance policy to cover what is not protected by the association. Most importantly, this should include loss assessment coverage. In addition, renters should be required to provide a renter’s policy to the association. While nearly all HOA boards know they must purchase insurance to protect the homeowners in their association, most board members are not insurance experts and therefore rely on an insurance broker or agent for advice. The important question is who should the board rely upon to get the most comprehensive coverage at the best price for its members. There are two types of insurance providers. There are captive agents who represent only their own company and there are independent broker - agents who work with many insurance companies. Captive agents are companies like Farmers, Allstate, and State Farm. These agents represent their company, not the insured. Independent broker - agents represent the insured which is the HOA, not the insurance company.
To illustrate: If you go to a Farmers agent and ask who has the best policy, they are going to tell you Farmers because they can only sell you a Farmers policy. If you go to an Allstate agent and ask who has the best policy, they are going to tell you Allstate because they can only sell you an Allstate policy. If you go to a State Farm agent and ask who has the best policy, they are going to tell you State Farm because they can only sell you a State Farm policy.
Farmers, Allstate and State Farm write lots of insurance policies, each one cannot have the best policy for your HOA. The best policy may be one of these carriers or it may be one of 50 or more other highly rated insurance companies that can be shopped by an independent insurance broker or agent. If your HOA is insured by Farmers, Allstate, or State Farm, and it turns out to be the best policy for your association, an independent broker-agent will tell you. If it turns out that your current insurance policy is not the best and least expensive policy available, your an independent broker-agent will also inform you as to how you can better protect the members of your association. On the subject of selecting an independent insurance broker, many will provide your board with a no cost insurance coverage evaluation. It’s recommendation that if you can find a broker-agent that also provides expert witness and consulting services to attorneys, you have found the right person upon which to rely.
Independent agents provide claims services. Unlike most captive agents, your independent insurance agent will assist you in completing any claims forms and will advocate for you instead of the insurance company.
Independent agents provide their clients with annual reviews to make certain their clients are always receiving the best value for their money. The insurance market changes from time, to time making the annual review process a valuable service.
There is no extra cost for the services provided. Independent agents are paid by each insurance company. Clients pay the same price for a policy regardless of whether they are represented by an independent agent or buy directly from the company.
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