Too often, association boards—and condo residents—discover serious coverage gaps in their insurance policies in the face of a claim. And often, the gap occurs when neither group wants to pay a high deductible.
In recent years, deductibles have risen from $1,000 or so to $5,000, $10,000 and far higher as condominium associations try to lower their premiums by purchasing coverage with a high deductible.
What happens next is predictable. After a flood, a fire, or similar damage, a unit owner is left facing a high deductible because the community’s master policy deductible is so high. It may not even make sense for the association to file a claim—as when an $8,000 damage claim is made against a policy with a $10,000 deductible. A high claim record leads to higher insurance rates, so associations may wish to avoid small claims.
Often enough, the condo owner’s insurance doesn’t cover that deductible. Perhaps it’s as high as $10,000 or $15,000 dollars on a $25,000 (or higher) repair. Traditionally, the deductible is the unit owner’s responsibility. But try to get them to see it that way. In fact, says one agency professional, insurance rates are rising after a long period of stability, so one may expect to see more of these high-deductible situations. A community association is, after all, obliged to save money where it can.
That’s fine—when everyone understands who pays what after a claim. There may, however, be a widening gap between unit owner expectations and the association’s policy, giving rise to disagreements that delay repairs or lead to lawsuits. Yet, there are relatively simple solutions, too often ignored by associations and individual owners.