An Educational Resource from Lordon Management

For more than 60 years, Lordon Management has worked alongside California community associations through changing markets, evolving laws, natural disasters, and economic challenges. One issue that has affected nearly every homeowners association in recent years is the dramatic increase in insurance premiums.

Many boards and homeowners understandably ask:

• Why are our insurance costs increasing so dramatically?
• Why is our deductible so much higher?
• Why are insurance companies refusing to renew coverage?
• Is our community doing something wrong?

The answer, in most cases, is no. These increases are part of a much larger insurance market that is affecting community associations throughout California.

A Statewide Insurance Challenge

Insurance carriers determine premiums based on risk. During the past several years, California has experienced record-setting losses from:

• Wildfires
• Severe storms and flooding
• Water damage claims
• Inflation in construction costs
• Rising labor costs
• Supply chain disruptions
• Large liability lawsuits
• Aging infrastructure throughout many communities

When insurance companies experience significant losses, they reassess the amount of risk they are willing to insure. Some carriers have chosen to leave the California market altogether, while others have significantly reduced the number of policies they write.

As competition decreases, remaining insurance companies often increase premiums and become much more selective regarding the communities they insure.

Replacement Costs Have Increased Dramatically

One of the largest factors affecting insurance premiums is the increased cost to rebuild damaged property.

The cost of rebuilding a condominium or townhome community today is substantially higher than it was just a few years ago due to:

• Higher material costs
• Skilled labor shortages
• Increased permitting expenses
• Longer construction timelines
• Inflation affecting nearly every aspect of construction

Insurance policies must reflect these higher replacement values to help ensure adequate coverage following a major loss.

Wildfire Risk Affects More Than Mountain Communities

Many people assume only communities located directly adjacent to open space are impacted by wildfire risk.

However, insurers evaluate many factors, including:

• Regional wildfire exposure
• Wind conditions
• Distance to fire services
• Building construction
• Roof materials
• Landscaping
• Access roads
• Historical claims within the region

As a result, communities many miles away from recent wildfires may still experience increased insurance premiums.

More Frequent and More Expensive Claims

Insurance carriers have also seen increases in claims involving:

• Water intrusion
• Plumbing failures
• Roof leaks
• Sewer backups
• Slip-and-fall accidents
• Balcony failures
• Storm damage
• Electrical fires

Even relatively small claims have become significantly more expensive to repair because of rising labor and material costs.

Higher Deductibles Have Become Common

Many associations are now seeing deductibles increase from amounts that were once considered standard to substantially higher deductibles.

While this may seem frustrating, higher deductibles often help make coverage available when insurers are limiting the risks they are willing to accept.

For many communities, accepting a higher deductible has become one of the few available options to maintain necessary insurance protection.

Insurance Companies Are Looking More Closely at Community Maintenance

Today’s insurance carriers are carefully reviewing the condition of the properties they insure.

Many now request inspections before issuing or renewing policies and may require corrective work involving:

• Roof maintenance
• Tree trimming
• Electrical equipment
• Fire protection systems
• Balconies and elevated structures
• Asphalt and trip hazards
• Lighting
• Handrails
• Deferred maintenance

Communities that proactively maintain their common areas often present a stronger insurance profile.

How Boards Can Help Protect Their Community

Although no board can control the insurance market, there are important steps that can improve a community’s overall insurability.

These include:

• Addressing deferred maintenance promptly
• Maintaining adequate reserve funding
• Completing recommended inspections
• Repairing safety hazards quickly
• Enforcing contractor insurance requirements
• Reviewing governing documents for outdated provisions
• Working closely with experienced insurance professionals
• Planning ahead for annual renewals rather than waiting until policies expire

Good maintenance practices not only help protect residents but may also make a community more attractive to insurance carriers.

Why Premium Increases Do Not Necessarily Reflect Poor Management

One of the most common misconceptions is that rising insurance premiums mean an association has been poorly managed.

In reality, many well-managed communities with strong financials, excellent maintenance programs, and very few claims have still experienced substantial premium increases.

These increases are being seen throughout California and, in many cases, across the nation.

Looking Ahead

Insurance remains one of the most important protections an association can maintain. While the current insurance market presents challenges, boards that plan ahead, maintain their communities responsibly, and work closely with qualified insurance professionals place themselves in the strongest possible position.

Although insurance costs may remain elevated for some time, informed decision-making and proactive maintenance can help reduce risk and support the long-term financial health of the community.

About Lordon Management

For more than 60 years, Lordon Management has partnered with California homeowners associations, condominium associations, and cooperative communities by providing professional community management, financial oversight, maintenance coordination, governance support, and educational resources.

Our goal is to help Boards of Directors make informed decisions that protect both their communities and their homeowners. As the regulatory and insurance landscape continues to evolve, we remain committed to providing timely information, practical guidance, and experienced management to the communities we proudly serve.

This article is provided for general educational purposes and should not be considered legal or insurance advice. Associations should consult with their legal counsel and insurance professionals regarding matters specific to their community.