Does a Condominium Have to Put Insurance in the Annual Budget?

I have been asked on a few occasions whether an association has to put insurance in the annual budget or whether it can just wait to determine the amount of the insurance, and specially assess for the same (without a line-item in the annual budget). Insurance costs have doubled, tripled or even quadrupled in the last few years. Many associations question, why put it in the budget when they have no idea what the actual amount will be?

The answer is because Chapter 718, Florida Statutes, requires that insurance be part of the annual budget. Section 718.112(2)(f), Florida Statutes, provides as follows:

“(f) Annual budget.—

1. The proposed annual budget of estimated revenues and expenses must be detailed and must show the amounts budgeted by accounts and expense classifications, including, at a minimum, any applicable expenses listed in s. 718.504(21).” (Emphasis added).

The applicable expenses in Section 718.504(21), Florida Statutes, includes insurance, and provides as follows:

“(21) An estimated operating budget for the condominium and the association, and a schedule of the unit owner’s expenses shall be attached as an exhibit and shall contain the following information:

(a) …

(c) The estimated items of expenses of the condominium and the association, except as excluded under paragraph (b), including, but not limited to, the following items, which shall be stated as an association expense collectible by assessments or as unit owners’ expenses payable to persons other than the association:

1. Expenses for the association and condominium:

a. Administration of the association.
b. …
g. Insurance.”

(Emphasis added).

Therefore, while it may be difficult to anticipate how much to budget for insurance in the annual budget, an association should make its best effort to account for the cost of insurance in the annual budget. If, after the budget is created, the increase in insurance is astronomical an association may consider a special assessment revise its budget, special assess for the unanticipated increase in cost at the time the budget was created or consider taking out a line of credit to assist with these costs. If an association has concerns on how to proceed, it should consult with the association attorney.