Page 6 - Boca ViewPointe - December '23

Page 6, Viewpointe December 2023
Is Self Insurance Possible For Community Associations?

By Donna DiMaggio Berger many legislators are optimistic that tort reform will To date, there has not been a condominium self-insurance
result in increased insurer interest in the Florida market, fund approved by the OIR. It’s not impossible to imagine
Insurance premiums that optimism has not yet been echoed by the insurance such a fund being created but it would be a challenge as the
have always constituted industry and relief from high premiums is still not a reality associations participating in such a group should be spread
a significant percentage in the commercial/residential policy space. out geographically to minimize the risk of all participating
of most community Regardless of the factors which created the current communities being impacted at one time. Most association
association budgets but insurance crisis in Florida, there is no denying that many boards know their fellow communities but not those in
astronomical increases residents are not equipped to pay the resulting budgetary other parts of the state. Associations participating in a
in recent years have increases and displacement of a large percentage of these self-insurance fund are subject to assessment for damage
completely changed the people is a real possibility in the near future. to other properties but have no way of controlling whether
budget landscape. In Many Florida associations are now asking whether those other properties are well maintained or have any
addition to unaffordable they can self insure and others are simply buying less form of hurricane protection on their buildings.
premiums, many insurers are denying full replacement coverage than full replacement value. The Condominium It is also important to note that self-insuring does not
cost coverage and demanding roof replacement for roofs Act requires all condominium boards in Florida to use mean “going bare” in terms of one’s ability to repair and/or
that are still functioning and/or pushing for complete their best efforts to obtain and maintain adequate property replace association property in the aftermath of a casualty
exterior hurricane protection in order to offer coverage. insurance for the Condominium and association property event. An association struggling to pay high insurance
When asked what factors caused this crisis, insurance for full insurable replacement cost or similar coverage premiums is likely to struggle even more to pay for repairs
experts point to the unprecedented losses over the last based on appraisals which are conducted every three years. and replacements out of pocket. If association members
few years as well as a lack of reinsurance options. While Some governing documents also require full replacement push their boards to self-insure, even a unanimous owner
value for coverage. vote to do so does not insulate the board members from
Golf Carts association must use its best efforts to insure the cooperative potential liability should a casualty occur. Board members
The Cooperative Act also provides that a cooperative
serve as fiduciaries while the owners do not. Moreover,
property but it does not impose the standard of full
existing owners and an inability to obtain financing for
insurable replacement cost based on appraisals conducted a lack of coverage may result in mortgage defaults for
Please Drive every three years. Some cooperative associations do not potential purchasers.
allow mortgages which provides those boards with more

One solution might be to change the statutory standard
Carefully! flexibility regarding coverage decisions as there are no from “best efforts” to commercially reasonable efforts
based upon commercially reasonable underwriting criteria.
lender rights to consider. Conversely, some cooperative
associations are subject to long-term land leases which Further legislation could also establish specific guidelines
require them to maintain a specific level of coverage and on how communities can self-insure if they want to do so.
self-insurance may not be an option for those communities. Boards can also work with consultants to determine what
The HOA Act provides that a homeowners’ association level of coverage other than full insurable replacement
Attention Dog Owners may create a group of no fewer than three communities cost is prudent based on forecasting models.

If you live in a single-family home which is not
and if the coverage they provide is sufficient to cover an
amount equal to the probable maximum loss for those subject to a mortgage, rolling the dice by not purchasing
It is your responsibility to pick up after your dog. communities for a 250-year windstorm event then such windstorm coverage might be a risk you’re willing to take.
It’s the law. coverage is deemed adequate. However, serving on a condominium, cooperative or HOA
Some of you have been negligent in doing so. Such probable maximum loss must be determined board where you are making that decision on behalf of
Please keep our through the use of a competent model that has been other owners and you are subject to statutory requirements
Boca Pointe community accepted by the Florida Commission on Hurricane Loss is a different matter entirely. The answer to the question
beautiful! Projection Methodology. Any such self-insurance group posed in the title of this article is complex and requires
for a condominium must be approved by the Office of considerable input and guidance from your community’s
Insurance Regulation in accordance with Chapter 624, F.S. professional advisors. 

A BETTER RETIREMENT PLAN
REQUIRES A SHIFT IN THINKING

Case Study # 1
Paying Off Debt to Free Up More Cash

• Meet Robert
• Robert, age 77, wants to pay off his existing mortgage to free up more
cash flow to pay for aging at home services.
• Home value: $610,000
• Current Loan: $225,000 (8 Years Left) 4.0%
• Monthly Payment: $2,300
• With a reverse mortgage, Robert can pay off his mortgage saving him
Case Study # 2 $2300 per month and $27,600 annually!

Replacing Lost Income
• Meet Carol
• Carol, age 80, is a widow, who sought upfront cash to mitigate the costs of
her husband’s final care. She also needed to replace lost income.
• Lost Income: $800 (her Social Security income) + $450 (husband’s pension)
• Remaining income: $2,100 (husband’s social security income)
• Home value: $650,000, free, and clear
• With a reverse mortgage, Carol was able to replace her lost income by
opting for tenure payments - and additional $2,114.81 per month in her
pocket!
Case Study # 3

The Power Of Planning With a Line Of Credit
• Meet George and Barbara
• George (75) and Barbara (68) were referred via a financial planner as they
were seeking to establish a line of credit to hedge against longevity risk.
• Great monthly cash flow
• Assets depleting due to retirement income draws
• Barbara was concerned about expenses and care for George as he ages.
• Home value: $620,000, free, and clear
• With a reverse mortgage, George and Barbara were able to achieve peace
of mind by establishing a $191,445.80 line of credit for future needs.

Reversing PA Mortgage, LLC
Michael J. Friedman, Broker/Owner “Call Today
215-901-6521 / 561-631-1701 No Obligation”
info@reversingmtg.com This material is not from HUD or
www.reversingmtg.com FHA and has not been approved by
Available Day, Evenings & Weekends HUD or a government agency.
NMLS# 1396947 NMLS# 131880

DISCLAIMER: The homeowner must meet all loan obligations including living in the property as the principal residence and paying property charges, including property taxes, fees, hazard
insurance. The homeowner must maintain the home, if the homeowner does not meet the loan obligations, then the loan will need to be repaid. License in PA #53672 and FL # MBR2252.
Examples are for illustration purposes only. Numbers vary depending on the state you live in. Subject to change at anytime.