How do I know if our HOA is underinsured – and how often should coverage be reviewed?

Underinsurance is the most common gap we find when we review association policies, and it usually stays invisible until there is a large claim. The mechanism is straightforward. The insured value was set at some point in the past, construction costs have moved since, and a commercial property policy may contain a coinsurance clause that reduces what the insurer pays when a building is insured for less than a stated percentage of its replacement cost. Whether that applies to your association depends on your policy, so the things to check are specific: when the replacement cost valuation was last updated, whether it came from a professional appraisal rather than an estimate, whether the policy contains a coinsurance clause and at what percentage, and whether it is written on an agreed value or a replacement cost basis. As a general practice, associations review coverage at each renewal and refresh the replacement cost valuation periodically, more often after significant improvements. Reviewing the actual figures for your association is a conversation with a licensed agent looking at the master policy and the current valuation.