Video summary

HOA Insurance Explained: Deductibles, Premiums & HO-6 Coverage with LaBarre Oksnee

Main summary

Key takeaways

Finance

Finance/Insurance Market Context (What Changed and Why Costs Spiked)

Premiums reportedly increased “300% to a,000%” over the past few years, attributed to a “perfect storm” of market pressures:

  • Higher frequency of natural disasters, including:
    • Wind
    • Hail
    • Wildfire
    • Hurricanes
  • Inflation affecting:
    • Labor
    • Building materials
  • Reinsurance market pullback / capacity reduction
    • Reinsurers charge more for risk protection
    • Primary carriers either pay more or carry more risk themselves
    • Result: higher premiums

Preferred carriers exited (or reduced capacity)

When preferred carriers exited or reduced capacity, HOAs/condos shifted into the surplus/excess / secondary market, where:

  • Carriers have more pricing flexibility
  • Underwriting can be tighter (e.g., wildfire risk, age of community)

Colorado-specific driver (hail claim frequency)

A Colorado example was discussed where hail claim frequency prevented carriers from sustaining 100% roof replacement economics when large deductibles apply (example cited: a $10,000 deductible issue). This contributed to Colorado becoming “one of the most expensive insurance markets.”

Deductibles and Risk Transfer (Core Concepts)

Why deductibles shifted higher (5–10% range)

Speakers described higher deductibles as tied to:

  • Carrier risk tolerance
  • Financial viability
  • The expectation that insureds take on more risk management

Instead of historically common fixed deductibles ($20k–$50k), carriers moved toward percentage deductibles (e.g., 5%–10%).

  • Example: $20 million property → $1 million deductible

Impact on boards/homeowners

  • Many communities lack capital to pay large deductibles
  • This can lead to:
    • Loans
    • Special assessments
    • Increased board/admin workload

Deductible isn’t “a bill” (how it works)

A deductible is better understood as money deducted from claim payments.

  • Example: $25,000 deductible on a $100,000 loss
    • Insurer pays $75,000
    • Insured covers $25,000 (repair costs)

“Cause/fault” caution

Speakers cautioned against loosely framing property insurance as “cause/fault,” recommending instead that property losses be framed as “sudden accidental” events.

  • Example phrasing used: “Discharge of water from a plumbing system contained within a building.”
  • Reason: “cause/fault” can drift toward liability/negligence territory.

HO-6 + Loss Assessment Endorsement (Homeowner/HOA Interplay)

What HO-6 covers

HO-6 = condominium unit owners policy, often compared to HO-3/single-family policies, but it generally does not insure the structure because the unit owner owns airspace.

Common coverages include:

  • Personal property
  • Property improvements
  • Personal liability
  • Loss of use
  • Loss assessment (key topic)

Loss assessment endorsement: why it matters

Loss assessment coverage is described as protection when an HOA issues a special assessment to multiple owners for an event where other coverage falls short.

Practical logic:

  • If an HOA has a wind/hail deductible (e.g., 5%)
  • And an HOA issues an assessment tied to the deductible shortfall
  • The homeowner can potentially use HO-6 loss assessment coverage to pay their share—if properly covered

Explicit cautions about loss assessment exclusions

Major warnings included:

  • Associations sometimes try to recover the deductible back from unit owners
    • This can accidentally convert what homeowners expected to be “property deductible coverage” into loss assessment claim mechanics
    • Coverage may then be excluded/limited
  • Many HO-6 loss assessment endorsements can have:
    • Sublimits
    • Exclusions
    • Example anecdote: homeowner thought coverage was adequate, but payout was only $1,000
  • Recommendation:
    • Homeowners should talk to their HO-6 agent/broker
    • Ask about loss assessment exclusions and coverage limits
    • Ensure coverage is “ready and enforced at time of loss”

Strategies to Manage Premiums (HOA Risk-Management Analogues)

Speakers proposed governance and operational steps that reduce insured exposure and/or claim frequency, improving insurability and future pricing.

Governance/document redesign (constrain what the HOA must insure)

  • Review governing documents for outdated language that forces the association to insure too much.
  • Align coverage with the HOA’s true responsibility (e.g., the “bare walls” vs. what the condo association covers concept).
  • Goal: reduce insurable exposure → potentially lower premiums and reduce the HOA’s loss history.

Deductible strategy (claims mitigation)

  • Increase deductibles carefully so carriers expect fewer submissions (lower claim frequency → lower premiums)
  • Use nondiscriminatory deductible policies / offset approaches so unit owners may handle deductible responsibility via HO-6 when appropriate
  • Key logic:
    • If deductibles are too low, boards are incentivized to submit more claims
    • More claims worsen claims history → higher premiums

Reduce claim-triggering exposures (deferred maintenance = insurability risk)

Insurers may refuse coverage unless risk is controlled/avoided.

Example: replace older high-risk electrical components. Panels mentioned:

  • Stab-Lok
  • Zinsco
  • Federal Pacific
  • Sylvania
  • SGT(E)
  • Challenger (wording varied by transcript)

Avoiding these can help prevent:

  • Coverage being declined
  • Exclusions (e.g., excluding fire caused by those panels)
  • Large uninsured gaps leading to special assessments

Opening carrier access (avoid being locked to one carrier)

A recurring recommendation: maintain the ability to get quotes from multiple carriers to avoid “one carrier option.”

  • More quotes = better leverage in pricing/negotiation

Loan Eligibility / Fannie Mae & Freddie Mac (Explicit Numbers)

A guideline was mentioned:

  • Fannie Mae / Freddie Mac won’t warrant loans unless deductibles won’t exceed ~5%
  • Threshold cited:
    • Deductibles exceeding 5% or $50,000 per unit may trigger loan non-warrantability

Consequences if not warrantable

  • Property values drop
  • Defaults increase
  • Communities may become cash-buyer only
  • More purchases by larger entities (described as “businesses, corporations coming in buying four, five, six units”)

Renewal Timing and Lead-Time Failures (Process/Risk-Management Friction)

How renewal proposals timing problems happened (2023–2025 period mentioned)

Issues described include quotes being produced days/hours before renewal rather than with advance planning.

Reasons cited:

  • Post-COVID staffing/workflow constraints
  • Secondary market overflow after carriers were “nailed” by claims
  • Carriers avoid holding terms too long (they want nimbleness and to avoid pricing being leveraged)
  • Secondary-market turnaround constraints

Best-practice expectation:

  • Brokers go to market about ~120 days prior to renewal
  • Proposals should reach boards:
    • At least 1 week in advance
    • Preferably 1 month

Loss history reporting as the “credit report” for rates

  • Loss history was described as a 5-year loss history
  • Carriers use it to evaluate:
    • Claim frequency
    • Claim development
    • Pricing/rating

Delays mentioned as possible causes:

  • Secondary market processing time
  • In one speaker’s claim: “games”/withholding by parties to disadvantage competing brokers

Legal/required timeline referenced:

  • Carriers must typically provide loss runs within ~15 business days once requested (as described in the transcript).

“Broker of Record,” Blocked Market, and Underwriting Access

Market blocking concept

Defined as a scenario where:

  • If one broker submits first, another broker may be blocked because the carrier treats the first submission as controlling.

Broker of record letter

  • Used to replace broker access/control so only the chosen broker can access the market.
  • Warning:
    • Often reduces competition rather than increasing it
    • Overuse or unnecessary letters can lead carriers to stop participating due to confusion/control issues

Explicit Disclosures / Disclaimers

  • No “not financial advice” disclaimer was stated.
  • The discussion references regulatory/legal concepts, including:
    • Doctrine of impossibility
    • Fannie/Freddie warrantability compliance context

Key Tickers/Assets Mentioned

  • No public-market tickers were mentioned.
  • Entities referenced:
    • Fannie Mae
    • Freddie Mac
  • Instruments/terms referenced:
    • HO-6 (condo unit owners insurance policy type)
    • Wind/hail deductibles and percentage deductibles
    • Reinsurance (risk transfer instrument for insurers)

Step-by-Step Frameworks / Methodologies (Implied Checklist)

A formal “investment framework” wasn’t presented, but an HOA insurance cost/exposure checklist was implied:

  1. Review governing documents to ensure the HOA insures only what it is responsible for
  2. Update/de-risk the property, especially aging electrical systems and deferred maintenance
  3. Adjust deductible structure to mitigate claim frequency (and coordinate deductible responsibility with unit owners via HO-6 where allowed)
  4. Secure loss assessment coverage correctly using HO-6 loss assessment endorsements
  5. Increase carrier access (avoid being stuck with a single carrier)
  6. Start renewal planning early (~120 days) and ensure loss history is provided promptly

Presenters / Sources

  • Mike Berg — Labar Oxnney
  • Eric O’Brien (spelled “Erica O’Brien” in the subtitle) — Labar Oxnney
  • James / Jonathan (podcast/video host name shown once as “Jonathan” in subtitles)

Original video