Article Courtesy of The Sun Sentinel
By Joe Kollin
Published July 16, 2007
Don't count
your insurance savings just yet, experts warn owners in condo, co-op and
homeowner association communities.
The state this month began letting associations form a self-insurance fund
to protect against windstorm damage. It also allows three or more
associations to pool their resources to buy windstorm insurance, but the
insurance must meet specific minimum requirements.
The new law, adopted by the state Legislature and approved by Gov. Charlie
Crist, was pushed as a way to control skyrocketing insurance costs after
the hurricanes of 2004 and 2005.
But some say taking advantage of it may not be a good idea.
"It will be tougher to get insurance this way than the old way,"
Norman Blanco said Friday after learning details of the measure.
Blanco is president of the Village of Arista Park, an 86-unit homeowner
association in Davie, and president of a neighborhood association with 965
units.
"It's very attractive to think of cutting rates by half or a quarter,
but you've got to consider, especially if you are close to the water or in
a high-risk zone, if it's worth it," said Tom Zutell, a spokesman for
the state Office of Insurance Regulation.
Self-insurance is both riskier and more complicated than the traditional
alternative, he said. If a fund doesn't have enough money for the claims
it is obligated to pay and doesn't have enough of the required
reinsurance, "there is nothing left except to foreclose" on
their units, he said.
Self-insuring isn't the same as stashing money away for a rainy day, he
added. The state approves and regulates all self-insurance funds and they
must comply with a long list of regulations. The state also assesses
self-insurance funds to pay claims for other funds or insurance companies
that can't meet their obligations.
"My advice is to do as much homework as you can with information we
have on the Internet and then contact a reinsurance broker who can go over
the potential pitfalls," Zutell said.
Reinsurance is insurance for those who provide insurance, whether an
insurance company or self-insurance fund.
No requests for either pools or self-insurance have been filed yet, Zutell
said.
Leaders of organizations that represent associations and unit owners offer
a word of caution.
"Self insurance is good, but it can be dangerous," said Jan
Bergemann, president of Deland-based Cyber Citizens for Justice. "If
there are not enough funds, who pays in case of damages?"
"Because of the risks involved, we are advising that associations not
join any self-insurance fund without first reviewing the details and risks
with a knowledgeable and experienced insurance professional," said
Yeline Goin co-executive director of the Community Association Leadership
Lobby.
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