From Annual Shock to Monthly Payments: A New Approach to Insurance Premiums

Insurance premiums for co-ops and condos are surging with double-digit increases year after year, and boards must pay these hefty fees upfront. But there's a financial tool that can help ease this burden. Michael Feldman, CEO of Choice New York, talks to Habitat's Paula Chin and breaks down how insurance premium financing allows boards to spread their annual insurance costs over several months, rather than being forced to make a single lump-sum payment.Key takeaways:* Insurance premium financing allows boards to spread their annual insurance costs over 9-10 months instead of paying the full amount upfront, typically requiring only a 2-3 month down payment with the remainder financed through monthly installments.* While interest rates for these microfinancing arrangements are in the low double digits, the actual cost per unit is often minimal — potentially just a few dollars per month for each resident.* For well-capitalized buildings, premium financing may not be necessary, but it can be particularly valuable for buildings needing to manage cash flow, or those caught off guard by last-minute premium increases from insurance companiesBoards considering this option should weigh the interest costs against the benefits of improved cash flow management and the ability to maintain proper insurance coverage without depleting their reserves. While national lenders offer this service, some property management companies now provide similar financing options at competitive rates.How To Run Your Building: For Co-ops and Condos