As a condominium property manager, you’re the primary point-of-contact for unit owners, the building’s board of directors, hired personnel, services, and contractors. This means you’re responsible for overseeing every aspect of operations, from maintenance work to vendor relationships which would include shopping for condo master insurance.
One of your most crucial roles is to purchase insurance for the building, but you must request master insurance proposals and multiple quotes first.
Condominium insurance is unique in that it requires two separate insurance policies; the HO-6 insurance policy, which covers a unit owner’s belongings inside the condo, and master insurance, which protects the building itself, including common areas, structural components, and the property grounds
Condo unit owners are responsible for purchasing their own HO-6 policies; however, it’s strongly recommended that owners check the condominium master’s insurance policy to avoid over or under insuring their unit. Property managers are responsible for facilitating the purchase and proposal process for the master insurance policy. The first mistake is to conflate these two types of condominium policies and what they offer.
Let’s take a look at eight common mistakes condo property managers make when shopping for insurance proposals and how to mitigate them.
Table of Contents
1. Misunderstanding Master Insurance Coverage
If you don’t work with an insurance agent, you’ll need to craft your own proposal requests to insurance vendors and wait for responses. This is a tough task to navigate on your own.
The whole point of requesting a proposal, also known as an RFP, is to ensure that your condominium receives the best coverage possible. The same applies to insurance quotes; you want to ensure you’re getting the right coverage at a fair price. This process starts with understanding the different master insurance policies available.
There are three types of policies to know:
1. Bare walls coverage
2. Single entity coverage
3. all-inclusive coverage (also known as “all-in” coverage)
You don’t want to under-insure the condominium or rack up costs under the wrong policy, either. Insurance agencies create custom coverage plans from these policies to tailor insurance to the condominium’s specific needs.
To avoid making mistakes with your quote requests and insurance RFPs, understand the difference between all three master insurance policies and how they relate to H0-6 coverage.
Let’s take a closer look at these master insurance policies:
Bare Walls Master Insurance
Think of this policy as the “bare minimum” of master insurance coverage. It only covers the bare structure of the condominium.
This policy strictly covers structural issues, shared common areas, hallways and entryways, building fixtures, and furnishings. This coverage does NOT include sinks, kitchen cabinets, bathtubs, carpeting, or any other structural components within the units themselves (these are covered by HO-6 policies.)
If the condominium’s HOA and board of directors want to insure structural components within owners’ condo units, mention single-entity coverage in your quote request or RFP.
This type of coverage includes everything covered in a bare walls policy, including fixtures, flooring, wallpaper, sinks, cabinets, and any structural component within the units; however, single-entity policies don’t cover structural improvements or upgrades made on the owner’s accord.
All-Inclusive Master Insurance
The third policy is all-inclusive insurance or all-in master insurance. This coverage combines the bare walls policy with everything covered under single-entity insurance.
It also insures any upgrades and structural improvements requested by unit owners. Owners may also request unit replacements, which restores the unit to its original condition; this means that the unit owner’s H0-6 policy only insures personal belongings inside the unit since everything else is covered by the master insurance policy.
Custom Master Insurance Coverage
Insurance agencies offer custom master insurance solutions to help HOAs discover the right coverage for the community’s needs.
Custom master insurance plans cover the following needs and more:
- Accidents in common areas, hallways, entrance ways, and property grounds outside
- Condo property damage
- Equipment damage and breakdown
- Loss from fraudulent activity
- Protection of property in transit (inland marine insurance)
- Sewer problems
- General liability coverage
While unit owners pay for condo HO-6 insurance individually, their Condo Homeowners Association (HOA) fees help pay for custom master insurance policies.
2. Not Consulting the Condo’s Board of Directors and Owner’s Association
Property managers must consult with the condominium board of directors and HOA before requesting quotes and master insurance proposals from vendors; Everyone must be on the same page before proceeding.
You’re responsible for managing the proposal and purchasing process, whereas the board and HOA are responsible for choosing the insurance services.
Every condominium’s HOA and board operates differently; you may have little input on the RFP, or you may be tasked with assessing the condo’s structural needs and making recommendations. Condo directors often spearhead the RFP process themselves too.
You know the building inside and out, but the Board and HOA understand the needs of the community. They may come to a consensus that an all-inclusive insurance policy benefits the community the most or decide that single-entity coverage is more popular with unit owners. Don’t move forward with an RFP or quote request until all members come to a consensus.
3. Not Performing Due Diligence when Requesting Proposals and Quotes
Not performing due diligence is one of the worst mistakes property managers can make. It’s easy to rush into proposal requests because the process is quite involved, but it’s also a vetting process; it’s important to be thorough and to the point.
Step one is to compare services, rates, and policy scope among condominium insurance providers; insurance vendors will also include service price in their RFP proposal responses. Measure these prices against the market average to estimate a fair price for coverage.
Here are a few more common due diligence mistakes to avoid:
4. Not Providing the Right Details In Your Proposal Requests
This mistake is common among new property managers. General RFP templates and previous RFP proposal examples are helpful, but they shouldn’t be copied word for word. Insurance agencies also have free quote forms for custom coverage solutions, so look for those when available.
While you should only limit your proposal request to insurance services you need, don’t ask about services that aren’t relevant to the condominium and HOA. This problem also arises when you model proposal requests from other condos; the size of the building and number of owners help determine services, and copying RFPs of larger (or smaller) condos can result in proposal responses that don’t meet the needs of the community or building.
Your RFP helps providers understand the condominium’s insurance needs inside and out. Be clear in your language, terms, insurance needs, and objectives for insurance. Describe the condo’s previous and current insurance policies to help providers make actionable suggestions on how to improve or expand coverage.
This is an involved process, but there are insurance agents available who can take the hassle out of shopping for master insurance.
Insurance agency quotes are far less of a hassle.
Whereas RFPs require more detailed information, you only need to provide the name of the condo, contact information, a current insurance policy (if available), and a brief message detailing your needs, and an agent will do the rest. You don’t have to create multiple proposal requests since your agent will shop for insurance from multiple vendors.
5. Working with too Many Insurance Agents
Insurance agents take the hassle out of the proposal request process, but working with too many agents is more trouble than its worth.
All the agents you’re working with are likely in contact with the same insurance providers. Ideally, you want to work with one experienced agent who can craft a custom master insurance plan from quality condo insurance products. There’s no real benefit from working with multiple agents, and it can burn a hole in the HOA’s budget.
Working with a lot of agents will also result in an influx of proposals. Options are a good thing, but a mountain of proposals can slow down the process. Plus, this approach doesn’t guarantee that the proposals are any better.
If you decide to work with multiple agents, work with no more than three. This strategy works best when each agent focuses on a specific insurance provider to craft the most cost-effective custom solution.
6. Only Prioritizing Price when Shopping for Proposals
It’s tempting to prioritize price when considering insurance proposals for condos. HOA fees pay for master insurance, and unit owners want their fees appropriately spent. Of course, your HOA and condo directors board want to save money, but settling for limited coverage can cost the HOA even more down the line.
Insurance is all about planning for the future. You hope an accident will never occur on the condo’s property grounds, but there are no guarantees. The plumbing and sewage may be working great now, but it could be a liability in the future. Current residents may not want all-inclusive insurance, but what happens when future residents want their upgrades covered by a master policy?
There’s nothing worse than the price of “what ifs.” If you’re concerned about price, an experienced insurance agent can help you get tailored coverage at a price the HOA can agree upon. Make sure to communicate your budget, so the agent knows exactly what they’re working with.
This leads right into the next common mistake.
7. Proposal Mismanagement
Two cornerstones of exceptional condo property management are stellar and meticulous planning. Mismanaging the proposal process can take a serious bite out of the HOA’s budget and frustrate unit owners.
Communication is essential, whether you’re crafting your own request for proposals or working with a condo insurance agent. If you’re tasked with managing the entire process, update the HOA and condo board consistently. Key HOA members may be appointed to help manage the proposal process with you; leverage project management apps and email to keep them in the loop and allow them to communicate policy changes as needed.
Don’t leave any stone unturned. If insurance providers don’t know what you need, you won’t receive the right proposals for your condo and community. Poorly crafted proposal requests can also hurt the reputation of your condo’s management team; that’s one reason why new property managers shouldn’t navigate the proposal process alone.
Don’t collect insurance proposals at the last minute or purchase policies without consulting with an experienced insurance professional. A reputable agency will walk you through the process to ensure you receive the best quotes and coverage possible.
Remember, the proposal process takes time. If you’re preparing proposals yourself, give providers adequate time to respond to your requests. Compare top insurance agencies and providers in your area, so you know what to expect.
8. Navigating the Process Alone
This mistake goes back to the issue of saving money. There’s a lot of pressure on condominium property managers and HOAs to cut costs, but new managers are vulnerable to more mistakes. Unless you have years of experience in drafting proposal requests, it’s better to trust an insurance agent with your objectives. Even the most experienced property managers prefer working with insurance agencies.
You can’t be everywhere at once. Your time is already stretched thin as a property manager. Working with an agent frees up more time in your day, so you can focus on building new condo units, making much-needed upgrades, hiring building contractors, redecorating common areas, and more tasks.
Discuss the benefits of insurance agencies with the condo board and HOA.
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Creating proposal requests require years of experience and time. Trust your insurance needs with an agency that understands master insurance proposals inside and out. Refer to this guide as you discuss options with the board and HOA.
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