Greetings! Background: Earlier in the year, there was a dispute between two HOA board members and the remainder of the community regarding the classification of our homes—townhome vs. condo. After a thorough review of the CCRs and other HOA administrative documents, it was understood that the community comprises townhomes and should be governed as such. Recently, the HOA board has sent out notifications that the current HOA insurance provider is planning to significantly increase rates, and as a result, the process to find other potential insurance providers began. Only one potential provider (AllState) has risen to the top with ‘reasonable rates’; however, it has been stated that this provider requires an internal inspection of all community units to underwrite the policy. A few questions: 1. The current townhome community’s insurance policy only provides protection for the outside of the units (roofs, common areas, etc.). Why would an internal inspection be required for a policy that covers the outside of the units? 2. How common is it to require an internal inspection for a new potential policy on townhomes? 3. As the CCRs do not grant the board the power to mandate an internal inspection on all homes, the HOA board’s communications are attempting to strong-arm all homeowners into compliance. Regardless of their tactics, obtaining 100% buy-in from any HOA is nigh impossible—a fairly common understanding. What other options would any reputable insurance provider allow? For example, an internal inspection of a subsample of the majority of units? 4. The HOA board claims ‘most providers will not touch the units due to the age of the community.’ The community was built in ‘83, comprised of single-story townhomes. The area is away from major bodies of water, has not been impacted by any nature disasters in over 30 years, and the community has not had any HOA insurance claims in over 15 years. The homes are in great shape in a highly desired part of the city. Is ‘age’ of the units a major influence in most policy providers’ coverage decisions? 5. Are there other factors insurance providers weigh heavily? Any good advice and guidance is welcomed. Many of the homeowners are simply not confident all of the facts have been laid out on the table, and nearly no one has a great understanding of the insurance industry. Thanks!
Inspections are common. Insurers want to ensure there are no preventable hazards or deferred maintenance issues. Imagine a hoarder situation or someone who decided to practice their blacksmithing hobby in their living room. Or maybe just leaky pipes and unsafe electrical. Refusing an inspection is a red flag. Obviously, if you want the least expensive rates, the carrier may have the highest requirements to get it.
It’s not unusual for insurers to request internal inspections, especially for older properties. They want to assess the condition of the units to avoid potential claims. Age can influence coverage decisions, especially if there are concerns about maintenance or upgrades not being done.
If the CCRs don’t allow for mandatory inspections, you might want to consult with a legal expert on how to address this with your HOA. It’s important to ensure that the board is acting within its authority.
Gathering feedback from multiple insurance providers could help. If AllState is the only one asking for inspections, perhaps there are other companies that could provide coverage without that requirement.
Make sure to communicate openly with other homeowners about these concerns. The more unified the community is, the better positioned you will be to negotiate with the HOA and the insurance provider.