Tips for Saving on Homeowners and Renters Insurance

How to save on your homeowners and renters insurance policy.

Note to renters: Renters, if you don't have insurance you should. Paying $3-5 a month (less than $100 a year), will save you and your bank account a world of pain if disaster strikes on your rental. For example, if the roof leaks or if there's a bug infestation and you need to leave your apartment for a few days, your rental insurance policy will often cover hotel expenses while the landlord remedies the problem.

Whether you own or rent your home, insurance is essential to protect your property and household goods. Comparison shopping for the best rates will certainly save you some money, but you also can save by following these tips:

• Choose a higher deductible—increasing your deductible by just a few hundred dollars can make a big difference in your insurance premium.
• Ask your insurance agent about discounts. Dead bolts, smoke and carbon monoxide detectors, security systems, storm shutters and fire-retardant roofing material are just some of the home safety features that can often lower your rate. You also may be able to get a lower premium if you are a long-term customer or if you bundle other coverage, such as auto insurance, with your provider. Some companies also offer senior discounts for customers who are older than 55 years.
• Don’t include the value of the land when you are deciding how much coverage to buy. If you insure your house, but not the land under it (e.g. in a condominium) , you can avoid paying more than you should. Even after a disaster, the land will still be there.
• If you’re a renter, don’t assume your landlord carries insurance on your personal belongings. They likely don’t provide renters insurance. Purchase a separate renters’ policy to be sure your property—like furniture, electronics, clothing and other personal items—is covered.

Don’t wait until you have a loss to find out whether you have the right type and amount of insurance. For example, many policies require you to pay extra for coverage for high-ticket items like computers, cameras, jewelry, art, antiques, musical instruments, and stamp and coin collections.

Furthermore, not all coverage will replace fully what is insured. An “actual-cash-value” policy will save you money on premiums, but it only pays what your property is worth at the time of loss (your cost minus depreciation for age and wear). “Replacement” coverage gives you the money to rebuild your home and replace its contents.

Finally, a standard homeowners’ policy does not cover flood and earthquake damage. The cost of a separate earthquake policy depends on the likelihood of earthquakes in your area. Homeowners who live in flood-prone areas should take advantage of the National Flood Insurance Program.

The Importance of Bids

Most homeowner and condominium associations engage the services of professionals to help with the operations of the community. These professionals include accountants, landscapers, contractors, and managers. As board members, you have a duty to ensure that association funds are spent carefully and responsibly.  Part of the process to ensure financial responsibility is soliciting and reviewing competitive bids prior to hiring professionals or vendors.

1.  Define the Scope of Work

Prior to seeking competitive bids the board or committee must develop a comprehensive scope of work. In other words, what services does the board want performed? Let's suppose the association wants to hire a landscaping company to maintain the common areas. The scope of work may look something like this:

SERVICE	FREQUENCY	COST
GRASS MOWING, FERTILIZING, AND MAINTENANCE	3X MONTH
TRASH COLLECTION IN COMMON AREAS	WEEKLY
TREE & SHRUB PRUNING & MAINTENANCE	MONTHLY
IRRIGATION SYSTEM MAINTENANCE	BI-ANNUALLY
APPLICATION OF HERBICIDES AND INSECTICIDES	AS NEEDED
TOTAL ESTIMATED COST:

Each potential contractor receives the same bid form and returns the form to the association with their total estimated costs and a break-down of each line item cost.  Otherwise, its easy to be misled. Perhaps one contractor's price appears significantly lower, but it's because they haven't included the costs associated with the maintenance of the irrigation system.

Ideally, three bids should be solicited and compared.  However, some associations develop strong and lengthy relationships with vendors. That's ideal, but it makes sense to occasionally compare services and prices of other vendors even if the board is intent on continuing its relationship with its preferred vendor or contractor.

2.  Do Your Homework

Once bids are received, ask around about the vendors who submitted bids. What's their reputation? In Oregon and Washington you can check on the status of a contractor's license, review their insurance, and see if anyone has submitted complaints against the company.

For Oregon contractors visit: http://search.ccb.state.or.us/search/

For Washington contractors visit: http://www.lni.wa.gov/TradesLicensing/Contractors/HireCon/verify/Default.asp 

3.  Hammer Out The Contract

Very few people enter into a contract with the expectation of future disputes or that the other party may breach the terms of the agreement.  At a minimum, service contracts should contain the following elements:

• Detailed statement of when and how work will be performed;
• Amount and terms of the contract price;
• Acts or omissions which entitle a party to terminate the contract;
• A warranty of any work or services performed;
• A statement by the contractor that it is licensed, insured and bonded;
• Indemnification language whereby the contractor will indemnify and hold harmless the association and the board members from legal claims arising out of the contractor's work; and
• Provisions governing how disputes will be resolved, i.e. mediation, arbitration.

As always, have an attorney prepare or review all contracts prior to signing.

4.  Review

Once the bidding and contracting are done, follow-up with contractors and vendors to ensure that the terms of the contract are fulfilled.  The board or a committee should review all association contracts on an annual basis to verify that services have been performed, if new bids should be solicited, and that payments have been made.

Insurance Policies Every Community Association Should Carry

The right insurance policies with the right coverage amounts are critical for every community association. State law may mandate insurance policies, and your association’s governing documents likely require certain types of coverage. Each association should review (on an annual basis) its coverage and coverage limits. Here are the policies every association should carry:

1. Property Insurance

Property insurance covers real property and insurable improvements owned or controlled by the association. Common examples include: clubhouses, restrooms, play structures, entrance monuments and fences.

The policies limits should be sufficient to cover replacement of any of the buildings or structures. If the association’s clubhouse is valued at $500,000, the property policy covering the clubhouse should be at least that much.

2. General Liability

Liability insurance covers the association and board against claims arising out of bodily injury. When an owner’s guest slips and falls on the association’s sidewalk, it’s the liability policy which is triggered and will provide coverage.

3. Directors & Officers Insurance

Some older governing documents may refer to this policy as “Errors & Omissions.” This policy will provide legal defense and coverage for claims asserted against the board or the association related to mismanagement, breach of fiduciary duty, or errors in judgment. The policy should cover the association, past and present board members, committee members, and managers of the association.

4. Fidelity Insurance

Fidelity policies cover theft of association funds. This type of coverage is especially important in self-managed associations which may not have sophisticated financial safeguards in place. Your policy limits on fidelity insurance should be least as much as the association has in all of its bank accounts.

5. Other Insurance Policies

In some cases, it may be appropriate (or required) for the association to carry earthquake or flood insurance. These policies are often expensive, but shouldn’t be overlooked if the risk is present. Lastly, if the association has employees worker’s compensation insurance is absolutely necessary.

Oregon HOA Annual Review Checklist

As the year comes to an end, take a few minutes and assess the health of your association.  Use the flowchart below to help you get off to a good start at the new year. Some things to Consider:

Insurance

• Oregon law requires the board to review its insurance policies and coverage annually.  ORS 100.417(3) & ORS 94.640(3).

Reserves

• ORS 100.175(3)(a) & ORS 94.595(3)(a) require that: "The board of directors of the association annually shall conduct a reserve study or review and update an existing study to determine the reserve account requirements."

Finances

• ORS 100.417(4) & ORS 94.640(4) require an association to file annual tax returns if necessary.