In cooperation with Honeycomb Insurance
You haven’t filed an HOA insurance claim in years, so why are your insurance premiums going up?
It may seem unfair at first, but it’s normal for premiums to increase year over year, and there are several common reasons behind this.
Most Common Reasons for Rising HOA Insurance Premiums
The most common reason for rising HOA insurance premiums is the same reason why the price of goods and services increase over time: inflation.
Insurance companies have to raise their premiums in order to keep up with inflation and the economy. The exact amount your insurance premiums increase because of inflation varies a lot by location, but it can be anywhere from about 4% to as high as 12%.
However, sometimes insurance premiums go up faster than inflation, which can be because of the other reasons below.
The older the property, the higher the premium (sometimes)
The older a property, the more at risk it is of problems that your HOA covers. These issues can be everything from structural issues to electrical and plumbing problems. Older properties may also be more prone to damage by fires or other natural disasters.
So, insurance companies often factor in the property’s age when determining your insurance premiums.
It’s important to note that not all older properties are subject to higher premiums. Properties built out of certain materials, such as brick, concrete, and stone, are more resistant to fires and other damage, so that they may qualify for lower insurance premiums.
Changes in the insurance market
Like the real estate market, the stock market, and markets in other sectors, the insurance market goes through ups and downs.
If many insurance claims were filed the past year (even if you weren’t one of them), it’s normal for insurance premiums to go up the following year since insurance companies paid out a lot and need to replenish their bank accounts.
Increased natural disasters
The more frequent occurrence of natural disasters, such as hurricanes and wildfires, as well as the more extreme nature of these disasters, can cause premiums to rise faster than inflation, especially in some regions of the country.
For example, in states like California, where major wildfires are pretty much a year-round issue, properties are more likely to need repairs or reconstruction. Not only that, but the cost of labor and materials tends to be higher. These are all things insurance companies factor into their insurance premiums.
Beware of potential fraud
A less common reason for higher HOA insurance premiums, but one that you should be aware of, is fraud.
There are several different types of fraud that can affect your premiums.
For instance, HOAs sometimes file fraudulent insurance claims to get a payout from insurance companies, which in turn can cause your premiums to increase.
In some cases, contractors have been known to commit insurance fraud by intentionally causing damage to properties and making fraudulent insurance claims on your behalf, keeping whatever extra money is left after fixing the damage.
Tips for Lowering Your HOA Insurance Premiums
- Keep up with maintenance to decrease the likelihood of needing to file a claim
- If buying a new property, keep the location in mind (watch out for disaster-prone areas)
- Don’t file a claim unless you absolutely have to
- Don’t miss any credit payments (keep your credit score high)