In 2007, the Florida Legislature enacted a number of changes to property insurance laws. Condominium, homeowner, and other residential associations may now participate in a Commercial Self Insurance Fund (SIF) to insure common property such as a condominium building. If your association is considering participation in a self-insurance fund, please take time to carefully consider the differences between insurance provided through a self-insurance fund and insurance provided by an insurance company.

Self-insurance funds do not operate like insurance companies. The policy (contract) issued to an association member of a self-insurance fund must contain the following statement:

"This is a fully assessable policy. In the event the fund is unable to pay its obligations, policyholders will be required to contribute on a pro rata earned premium basis the money necessary to meet any unfilled obligations."

Once an insurance policy premium is paid to an insurance company, the company cannot come back later and ask for more money because the company paid more claims than they expected.

This is not true for self-insurance funds. In a self-insurance fund, unit owners can ultimately be responsible for the shortfall of the self-insurance fund.

Insurance policies issued by insurance companies that are authorized to do business in Florida are protected by the Florida Insurance Guaranty Association (FIGA) in the event that the authorized insurance company goes bankrupt.

Participants in a self-insurance fund are not protected by FIGA. If a self-insurance fund becomes bankrupt, associations participating must pay the unpaid claims -- this could result in assessments being levied by the association against individual property owners who are members of the association.

If your association is considering membership in a self-insurance fund, please be aware of all the contract clauses – and be sure you understand at what dollar amounts your association would have to assess your individual homeowners or unit owners to pay damages for your buildings or for the damages to another member's buildings after a windstorm or hurricane event.