The Painful Truth About Premiums

When it comes to insurance premiums, the landscape has totally changed. You used to see 2% or 3% increases, then around 5% after Hurricane Sandy, but now umbrella policy costs have tripled or even quadrupled. That really hurts smaller co-ops and condos, where there are fewer people to spread the pain. 

I have a five-unit co-op on the Upper East Side whose premiums went up from $25,000 to $48,000. Some of that was because the prior carrier had paid out a very large claim. We were in the middle of repairing some 60-year-old valves and pumps when the equipment just gave out, causing $90,000 in damage to the elevator and various electrical equipment, and the board couldn’t afford to pay out of pocket. So we had to go back to five shareholders and say, “For the next six months we need an extra $25,000.” That’s a really big number.

Another client, a 15-unit condo in Harlem, just saw its umbrella policy premiums more than triple from $3,000 to $10,000, simply because of the marketplace. The good news was that the board had gotten a renewal offer from its existing broker, but we reached out to other brokers and wound up getting more than $4,000 a year in savings. Still, it’s a significant increase.

People always say, “Well, why do I need all of this insurance, and why should I pay for it?” And inevitably, the year that you decide to cut your umbrella coverage in half is the year in which you have the claim. Then you go back and say, “Maybe we shouldn’t have done that.” Yes, there is such a thing as too much insurance, but you should always make sure you have enough for the worst-case scenario.