Navigating Hawaii’s Condo Insurance Challenges: What Homeowners Need to Know

Have you noticed that condo insurance in Hawaii is becoming a major expense? If so, you’re not alone. Many homeowners are facing increasing premiums due to a tightening insurance market and higher costs associated with construction and property maintenance.

Here’s what’s driving these changes and what you can do about it.

Why Are Insurance Costs Rising?

Hawaii's insurance market faces similar challenges to other high-risk regions like Florida and California. Several factors are making coverage more expensive and difficult to obtain:

• Stricter Guidelines: Stricter underwriting guidelines mean that insurance companies are being more cautious about the homes they insure. For homeowners, this often means they’ll need to provide more documentation – like updated photos, proof of maintenance, or details about the roof and condition of the home. Some may find it harder to qualify for coverage, especially if their property is older or in a high-risk area. Even existing policyholders can be affected, as insurers are now reviewing policies more closely at renewal and may choose not to renew if certain standards aren’t met.

“While these changes can be challenging – especially for families with limited resources – they are meant to help ensure that homes are properly protected, and that coverage is in place when it’s truly needed,” explains Alaissa Balecha, Vice President of Personal Lines at Pyramid Insurance.

• More Detailed Verification Process: Insurance companies have introduced web-based portals where homeowners must upload detailed documentation to verify property conditions. This process helps insurers assess risk more accurately but also adds complexity for homeowners. Even after providing all necessary documents, there is no guarantee of coverage approval, which can lead to frustration and uncertainty. Homeowners must ensure that their documentation is thorough and up to date to avoid potential delays or denials.
• Rising Construction Costs: The cost of rebuilding has surged in recent years, leading to higher coverage amounts – and, in turn, increased premiums. "Many homeowners don’t realize how much rebuilding costs have risen," says Balecha. "It’s crucial to regularly review and update your policy to reflect these changes and ensure you have adequate coverage. Without adjusting for these rising costs, homeowners may find themselves underinsured in the event of a disaster."

Unfortunately, many homeowners don’t discover they’re underinsured until they file a claim – and by then, it may be too late to make changes. Being proactive now can help prevent costly surprises in the event of a disaster.

What Homeowners Can Do

While it’s impossible to avoid rising costs entirely, there are ways to mitigate the impact:

• Obtain Competitive Quotes: Don’t automatically renew your policy – shop around and compare offers.
• Consider Higher Deductible Options: If permitted by your mortgage lender, opting for a higher deductible can lower premiums.
• Invest in Home Upgrades: Keeping your home well-maintained and making safety improvements (e.g., installing sprinkler systems) may help reduce costs.
• Ensure Adequate Coverage: Given rising construction expenses, make sure your policy reflects current rebuilding costs.
• Work with Local Insurance Experts: Hawaii-based brokers understand the market and can help homeowners find cost-effective solutions.
• Advocate for Legislative Support: Supporting policies that promote insurance affordability in high-risk areas can lead to long-term relief.

Hope on the Horizon

There are ongoing discussions about government-backed insurance programs that could provide relief. For example, California offers a state-sponsored insurance plan covering up to $3 million in homeowner insurance. However, such programs may not fully meet mortgage lender requirements, as Fannie Mae and Freddie Mac require coverage for 100% replacement costs. Additional financial assistance programs, such as PACE, may be options for homeowners needing support to make necessary property improvements.

“We understand that rising costs can be frustrating for homeowners, especially as they often lead to higher insurance premiums. However, taking proactive steps – such as reviewing coverage, comparing policies, and working with knowledgeable local agents – can help homeowners find the best options and stay properly protected,” adds Balecha.

Although condo insurance costs are increasing, proactive homeowners can take steps to manage expenses and secure proper coverage. For more tips on homeownership in Hawaii, visit cpb.bank/insights.