We have talked ad nauseam about increases in insurance premiums, how they will most likely never go back down to the levels of years past, and how difficult it is for many associations to pay for them.

Some carriers allow installment payments, but not many. Most banks will not provide a loan to pay for insurance premiums. We have heard rumblings that some banks are starting to, so check with yours for information. You can call an emergency special assessment, but most attorneys say you can only do that once (after that, it is no longer considered an “emergency”).

So, what is an association to do?

As an insurance professional, I have worked with a couple of different companies that provide financing options for insurance premiums. Most charge interest rates between 10% and 19%, depending on the amount financed and the relationship they have with the insurance broker requesting the financing. In most cases, there is no pre-payment penalty, meaning that if you are able to pay it off early, you can do so without any extra fees. In most cases, policies with smaller premiums such as workers’ compensation, crime and D&O must be paid in full up front. Because of this, these premiums are rarely included in financing agreements.

Other communities that have well-funded reserves have essentially provided their own financing. Since money borrowed from reserves must be paid back within one year, they can set up installment payments to pay themselves back.

Regardless of how your community pays its insurance premium, the best plan is always to consider premium increases when budgeting. Plan for the worst-case scenario and hope that when your renewal comes in, it is under budget.

Terri Guest, CIRMS, CMCA, (CA License #0F92313) is the Director of Client Experience & Education for Berg Insurance Agency in partnership with LaBarre/Oksnee and can be reached at Terri@berginsurance.com. Have an insurance question? Ask Terri and your question may be the subject of next month’s edition of Coverage Corner! If your question is picked, you will win a gift card!