If an HOA's (Homeowners Association) insurance carrier doesn't renew their master hazard insurance policy, the HOA will need to act quickly to resolve the situation, as this insurance is vital to protect the common areas and structures of the community. Here's what they may do:
Find a New Insurance Provider: The HOA will likely start seeking a new insurance carrier to secure coverage for the property. This can be a lengthy process, so it’s important to start early. The HOA may work with an insurance broker specializing in community associations to find the best terms.
Review Policy Requirements: Some states or local governments require certain levels of coverage for HOAs, particularly for the master hazard insurance policy. The HOA may need to ensure that any new policy meets these legal requirements.
Evaluate and Adjust Coverage: The HOA might need to reevaluate its coverage needs, especially if the previous policy no longer aligns with current property values or potential risks. In some cases, they might need to increase or decrease coverage limits.
Communicate with Homeowners: Homeowners in the community will be impacted by the HOA’s insurance situation. The HOA board may need to inform residents about the delay in renewing the policy or any changes to premiums and coverage terms.
Temporary Coverage: If the HOA is unable to secure a new insurance policy immediately, they might need to look into temporary or short-term insurance to bridge the gap until a new policy is in place.
Assess the Cause: It’s important for the HOA to understand why the insurer decided not to renew the policy. It could be due to factors like an increase in claims, changes in the property’s condition, or broader market issues (like a reduction in available insurers in the area). Understanding the cause can help the HOA adjust its risk management strategies moving forward.
Legal Implications: If the HOA cannot secure a policy in a reasonable amount of time, it could face legal challenges from homeowners or even municipal authorities, particularly if they are required to maintain insurance by law.