Make Sure That Your Association Has Enough Insurance Coverage!

Make Sure That Your Association Has Enough Insurance Coverage!

By Dave Koldzik, CRVS, PPIA, RSS / Published June 2024

Photo by Faizal Bin Ramli

With the huge increase in insurance premiums over the last year or two, some associations are looking for options to reduce their costs. One of the actions we are seeing is that associations are taking steps to decrease the amount of coverage on their building(s), which leads to a failure to properly insure them—this is something that should never be done!

     We all know that costs have gone up on everything across the board over the last few years. Historically construction costs in Florida have increased about three to five percent annually. These numbers over the last three years have skyrocketed. Construction costs in the Sunshine State increased an average of 14.2 percent in 2021, 9.7 percent in 2022, and 9.4 percent in 2023. Even though these increases are showing signs of slowing, the costs have certainly not decreased at all. These historic changes are caused by several factors: cost of materials, payroll, fuel costs, and higher contractor insurance rates just to name a few.

     Ever since 2007 the State of Florida has mandated that all residential condominium associations have an independent replacement cost valuation (RCV or sometimes called an insurance appraisal), inspection, and report completed at a minimum of every 36 months. This makes sure that the association has enough coverage if a major claim were to occur. If the association does not comply, then it is in violation of Florida Statute 718.111(11)a. Failing to comply with Florida statutes can lead to actions by the Florida Department of Business & Professional Regulations (DBPR), including fines of up to $5,000 per violation.

     Besides the statute requiring this, the insurance policy itself says that the insured (the association) is guaranteeing the insurance company that they are insuring the property to the proper limits. This is called the “insure to value” clause and is located in every insurance contract. By signing the policy application, the signer (president, board member, or CAM) is guaranteeing that the replacement amount is accurate. In the event of a claim, if the insurance company finds out that the amount of coverage is not correct, they can then prorate the claim amount to reflect the amount that it is under insured. This clause applies to commercial condominiums and homeowners’ associations as well as residential condominiums. No matter what type of association you have, it is always the board of directors’ fiduciary responsibility to make sure that there is the proper amount of insurance coverage to protect the interest of the owners.

     When Hurricane Ian struck the Fort Myers area in September 2022, several condominium associations found out firsthand about not having enough insurance coverage. This is adding insult to injury, having to go through the impact of a major loss and then finding out that the association did not maintain adequate insurance coverage.

     The bottom line is to make sure that you maintain the proper amount of coverage by having replacement cost valuations done on a regular basis. 

Dave Koldzik, CRVS, PPIA, RSS

Expert Reserve Services

     If you have any questions, please feel free to email Dave Kolodzik at, call 386-677-8886 ext. 1000, or visit