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In this easy-to-read condo association flood insurance policy buyer's guide, the industry's top RCBAP insurance experts will help your condominium association learn the smartest way to save money and get the best coverage for your condo owners associationflood policy.
The Residential Condominium Building Association Policy or RCBAP is a special flood policy written for a condo association to cover condominium buildings against financial loss from flooding.
As many condo owners association board members know condominium buildings located in areas with increased risk of flood damage require a special type of flood coverage. The RCBAP program is also referred to as a master flood insurance policy. Same thing just two different names.
If you looking for legal advice on flood requirements for HOA's, you may want to read this short blog by the Merlin Law Group which is titled, "Condominiums Associations Must Purchase Flood Insurance". In a court case between Porter v. Beaverdam Run Condominium, the courts ruled that the Association is “obligated by the Declaration and the Condominium Act to maintain insurance against all risks of direct physical loss which are commonly insured against, to the extent that such insurance is reasonably available… and a flood is a risk of direct physical loss which is commonly insured against.”
If your condo association is in a FEMA-designated flood zone, the answer is a resounding yes. You can look up the FEMA flood maps here and see if a property is the Special Flood Hazard Area or SFHA.
So, a condominium building will be required to have a flood insurance policy if it is located in one of the designated flood zones established by FEMA showing an increased exposure to flood risk.
Unit owners living in a condo building who have a mortgage backed by Freddie Mac Financing will be required to carry maximum limits of up to $250K in flood coverage for their individual condo unit to satisfy their lender if the building is a higher-risk flood zone. The unit owner depends on the HOA to keep this necessary coverage to satisfy these requirements.
Flood insurance offerings can range by tens of thousands in annual cost from one insurance agent to another. The costs involved to buy an RCBAP can be significant. Even a simple mistake can cause premiums to easily triple. We had one scenario where an elevation certificate was causing a premium to be 10X higher.
Choosing the right insurance agent who has the proper resources and experience in this unique insurance niche is everything when it comes to getting the best pricing and the right RCBAP policy.
The RCBAP is often misunderstood by your local insurance experts and quite possibly maybe even your current insurance agent? As a result, many residential condominiums are often underinsured or have the wrong type of policy altogether.
Sometimes an agent may write a General Property form policy to save money with an excess flood policy when you are eligible for an RCBAP. This might look nice a cheap, but the lack of coverage could be catastrophic in an actual flooding event. Every unit owner depends on their association board members to protect their best interests.
Unfortunately, townhomes are not eligible for an RCBAP program. RCBAP's are designed to cover condominium buildings owned in the form of a condominium building. Issuing RCBAP flood insurance policies instead of the proper dwelling flood policies would cause devastating financial implications if there were ever a loss and if this happens you will hope your insurance broker has a very substantial E&O policy to cover the gap in a timely manner.
Managing an HOA with townhomes in a flood zone is hard enough. The last thing you need to happen on your watch is your inexperienced broker issues an insurance policy the wrong way and a flood loss causes serious damage to an insured property that ends up being underinsured, or worse, not insured at all.
In the high risk zones having a huge gap in coverage or the wrong type of policy could easily cost your homeowners' association millions if there is a loss. Your community can rest assured that these errors will never happen as long you enlist the expertise of an experienced flood specialist company like Yep Insurance who has a proven track record of success with RCBAP's.
Having a condo building in a FEMA flood zone can make things complicated even for the most seasoned agents who have developed extensive knowledge related to other non-flood expertise geared toward condo associations. When an agent writes flood insurance for your HOA and has no business doing so you better hope they have enough coverage to cover your potential losses on their errors and omissions insurance coverage.
Insuring condo associations against floods can be difficult. The wiser agents know when to refer their client's flood insurance needs to an expert like the ones available through our company who specializes in the residential condominium building association policy.
We have rewritten numerous RCBAP policies and have helped our clients identify and fix countless errors. Unfortunately, you don't have to look far to find critical errors that cause huge gaps in coverage or massive overages in premiums.
Replacement Cost Value or RCV on an RCBAP is another key item that is easy to misunderstand because of how different it is from Replacement Cost Value on a regular master hazard policy. Your RCBAP Policy needs to have the right kind of replacement cost dialed in for the entire building or your HOA will be subject to a hefty co insurance penalty. NFIP guidelines state that you need a replacement cost policy with max limits up to $250K per unit.
Not all RCBAP flood insurance policies are created equal and there is no one-size-fits-all solution. Insuring condos against flood exposure requires extensive knowledge, a large variety of different carriers to shop, and a proven track record. There are a large variety of circumstances where either NFIP or the Private could be a good fit for your association.
Private may not be an option in some cases, and in other cases it may not be the best fit. The difference in cost could be significantly different. The best way to really find out is to work with someone who not only has access to all these options but can do a thourough analysis and help you understand the different circumstances that are unique to your property. Faulty Elevation Certificates can easily wreak havoc on your premiums. You really need someone who is used to identifying these errors and can uncover such things.
Some of our articles are meant to be more of a fly over like the one you just read and others go into much more depth. If you want to dive deeper in to this subject you will love this article here.
You can submit a quote request via our new online submission form and get instants rates today. If you have questions for our RCBAP specialists you can call us directly at 800-761-7994 you can book a special meeting with with us here. We take client service serious so whether it's just a consultation or for claim payments, we are always eager to serve you and ready to get back to you in a timely manner. We hope you found this information helpful. If you did please consider sharing it with your HOA or any others that may be able to benefit.