Special 4-Part Report: Preparing Your 2013 Budget. Part 3: Insurance

Spain also advises that boards should be familiar with their claim history. "If you find out your rates are going up 20 percent, well, that may be because you have five major claims pending," he says.

Barbara Strauss, executive vice president of York International, says her clients saw increases as low as 3 percent and as high as 20 percent for 2012. She notes that one way to consider how much your rates may increase is to also think about what type of risk you have. If you have a large building, you have more chances for claims. If you have a lot of amenities — swimming pools, decks, etc. — that could lead to an increase in claims.

Terrorist Targets

Buildings that are close to possible terrorist targets can see increases in premiums because of the increase in risk. It's very hard to give a projection for 2013," she says, but a 15 percent bump is not out of the realm of possibility. All managing agents should consider thinking about that."

Edward J. Mackoul, president of Mackoul & Associates, predicts price bumps ranging from five to nine percent. Smaller buildings often get lower rates, he says, because more insurance companies can handle their claims and more competition means lower rates.

"If you've got an eight-unit building that needs $2 million in insurance, that's different from a four hundred-unit building that needs $60 million. There are not as many companies large enough to handle the possible claims," he says. "Some companies shy away from larger buildings because they fear they are not as profitable. A burst pipe on the 10th floor leads to 10 units being damaged."

Mackoul and Spain both say that the insurance industry works cyclically in pricing, hitting peaks and valleys. In recent years, insurance companies lowered rates significantly in order to lure new customers. But once those customers sign on and eventually start making claims, insurers have to raise rates to boost their profit margin. That cyclical nature, combined with last year's economic upheaval and rough weather, led to a perfect arena for hiked rates. "Everyone took a bath in 2011," Mackoul says.

Part 1: New York City Property Taxes

Part 2: Water and Payroll

Thursday morning: What to Expect in 2013 Fuel Costs

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