How should a small HOA budget for rising insurance premiums?

By OurHOA · General information · Revised November 2, 2026

How an HOA treasurer budgets for rising insurance premiums: forecasting the renewal, funding the deductible, timing the cash, and closing a mid-year shortfall.

Part of the HOA board handbook: treasurer and money.

The short answer

Stop budgeting insurance as last year's premium plus a few percent. Get a range from the insurance agent before the budget meeting, budget at the top of it, and account for the month the policy renews, because a mid-year renewal spreads one increase across two fiscal years. Then budget two things boards often skip: a fund for the deductible you would owe after a storm, and the cash to pay the premium when the bill is due. Decide in advance how the association would cover a renewal that comes in above the budget. Insurance, budget and assessment rules come from your declaration, bylaws and state law, and they differ by community. This is general education, not legal or insurance advice.

Get a number from the agent before the budget meeting

About 60 to 90 days before the board adopts the budget, ask the agent for an estimated renewal range in writing, the reasons behind it, and whether the carriers will want an updated building value. That last point often drives the increase. The Colorado Division of Insurance notes that insurers have become more insistent that associations insure to value, meaning coverage that matches current rebuilding costs, and Colorado section 38-33.3-313(1)(a) already requires common property coverage of at least full insurable replacement cost, to the extent reasonably available, at purchase and at each renewal. When rebuilding costs rise, the insured value rises and the premium follows. Ask the agent for the claims on your loss runs too. One hail claim can move your number more than the market does. Budget at the high end of the range. Coming in $3,000 under leaves a small surplus. Coming in $3,000 over means a hard conversation with owners.

Watch the renewal date against the fiscal year

Most small associations run a calendar fiscal year, but policies renew whenever they were first bought. Take a 60-home community with a January fiscal year, a July 1 renewal and a $24,000 annual premium. The agent expects the renewal to come in 20 to 35 percent higher. Budget at 35 percent: the new policy year costs $32,400. On an accrual basis, the budget year carries half of the old policy, $12,000, and half of the new one, $16,200, for $28,200. That is $4,200 more than last year, or $70 per home for the year, about $5.83 a month. Next year the full $32,400 lands, and the same $4,200 increase shows up again even if the market goes flat. Tell owners about that second step now. If you keep books on a cash basis, budget the month each payment actually goes out instead.

Budget the deductible, not only the premium

Carriers often answer a hard market with higher deductibles, and a percentage wind or hail deductible can be far larger than the premium savings that came with it. Say the clubhouse, pool building and entry structures are insured for $2.5 million with a 2 percent wind and hail deductible and a $10,000 deductible for all other perils. One hailstorm leaves the association paying the first $50,000. Hold that money somewhere. A common approach is a deductible fund, tracked as its own line and kept apart from reserves, which are usually committed to the components in the reserve study. In the example, $10,000 a year builds the full $50,000 in five years, about $167 per home per year. Colorado section 38-33.3-313(6) lets an association adopt a written, nondiscriminatory policy on claims and deductibles, charge deductibles it pays to an owner whose negligence caused the loss, and split a deductible pro rata when several units are damaged. Adopt that policy before a claim, not during one. Check your declaration before you rely on similar authority in Texas or Florida.

Plan for the cash, not only the annual total

An annual budget can balance while the checking account runs dry in the month the premium comes due. Ask the agent how the renewal will be billed: paid in full at binding, in installments from the carrier, or through a premium finance agreement. Installment plans and premium financing spread the cost but usually add fees or a finance charge, and that charge belongs in the budget as its own line. Then build a month-by-month cash forecast for the year. Mark the month each premium payment is due next to the months when owners pay dues. An association that bills quarterly and pays a $32,400 premium in full on July 1 needs that cash in the operating account in late June, not after the July dues arrive. If the forecast shows a gap, choose financing or an installment plan before renewal day. Our guide on how to read an HOA insurance renewal quote covers comparing the quote itself.

When private carriers will not write the policy

In some markets the choice becomes a state-backed insurer of last resort, and each one changes the budget in different ways. In Texas, the Texas Windstorm Insurance Association, which operates under Insurance Code chapter 2210, writes wind and hail coverage in the 14 first-tier coastal counties and part of Harris County east of Highway 146. Commercial buildings, townhouses and condominiums can be eligible. Applicants need a declination from at least one authorized insurer, and buildings generally need a windstorm certificate showing they meet building codes. A building in flood zone V, VE or V1-30 that was built, altered, remodeled or enlarged on or after September 1, 2009 must also show proof of flood insurance if a National Flood Insurance Program policy is available, so price that premium too. You still need a separate policy for fire and other perils. In Florida, Citizens Property Insurance Corporation offers commercial residential policies for homeowners associations' common property that cannot find coverage in the private market. Those policies exclude liability coverage, so keep general liability as its own budget line. In Colorado, the FAIR Plan created by HB23-1288 covers commercial property up to $5 million for property and contents combined, at actual cash value, not replacement cost, for a limited list of perils. An applicant needs three declinations from standard insurers. The Colorado Division of Real Estate calls it a last resort, not a long-term solution, and says it may not meet the needs of larger or higher-value associations, and it warns that coinsurance may apply to an underinsured property. Actual cash value pays less for an older roof or building, so a board moving to the FAIR Plan should budget a larger deductible fund and ask the agent about additional layers of coverage to close the gap.

Closing a mid-year gap

If the renewal comes in above the budget, look at the options in this order. First, cash already on hand: an operating surplus or savings elsewhere in the budget. Second, a higher deductible, only if the declaration, state law and any lender rules allow it and the board funds the added exposure. Third, premium financing to spread the cost to the end of the fiscal year. Last, a special assessment or a mid-year increase, following the process your documents and state law require. In Florida, section 720.303(2)(c)2. requires written notice of any board meeting where special assessments will be considered, mailed, delivered or sent electronically to members and posted conspicuously on the property at least 14 days before the meeting, stating that assessments will be considered and their nature. In Colorado, section 38-33.3-303(4)(a) requires the board, within 90 days of adopting a proposed budget, to mail or otherwise deliver a summary to owners and set a meeting. Posting the proposed budget on the association website counts as delivery. Unless the declaration requires otherwise, the budget stands unless a majority of all owners vetoes it at that meeting. Ask counsel whether your documents treat a mid-year change the same way. In Texas, the declaration and bylaws usually set whether the board can levy a special assessment on its own or needs an owner vote, so read them before promising owners anything. Do not borrow from reserves to pay a premium unless your documents and state law allow it, and record a repayment schedule in the same motion if you do.

Wording to copy

A budget note owners will read: "Insurance is our largest increase this year. The association's policy renews July 1, and our agent expects the premium to rise 20 to 35 percent. We budgeted at the high end. Half of that increase falls in this year's budget and half in next year's. We also added $10,000 a year to a deductible fund, because our wind and hail deductible is now 2 percent of the insured value of our common buildings, or $50,000 per storm. Please send this notice to your own insurance agent and ask whether your policy includes loss assessment coverage." A motion for the budget meeting: "Motion to adopt the [year] budget with an insurance line of $[amount] and a deductible fund contribution of $[amount], and to direct the treasurer to report actual insurance costs against the budget at each board meeting after the renewal." Our guide on how to explain a dues increase to homeowners covers the rest of that conversation.

Mistakes treasurers make

Forgetting that a mid-year renewal puts the same increase into two budgets. Cutting coverage below what the declaration or state law requires to hit a dues target. Raising the deductible to save premium without setting aside the difference. Leaving the premium payment date off the cash forecast. Waiting until two weeks before renewal to ask for quotes. And telling owners about the increase after the budget is adopted instead of at the meeting where it is proposed.

Sources

These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.

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