1) Bare Walls In – policies covering all real property from the exterior framing inward, excluding fixtures or other installations within the unit.

 2) All In – policies covering all fixtures, installations, or additions within the interior surfaces of the individual units.

 Obviously the best one for your unit owners would be the All In condo association insurance policy, which would limit the need for owners to purchase additional coverage. Condo associations buying Bare Walls In coverage leave a bit more loss exposure for their unit owners. Most condo associations will advise unit owners on which policy is covering the premises. But what about deductibles?

 Most condo association insurance policies have a deductible. As condo associations reassess their insurance limits and premiums and increase their deductible amounts, many unit owners are left exposed to large loss amounts. Why? Because condo associations can, and do, pass the deductible on to the unit owners.

 In the past, deductibles topped out at $5,000. With historic losses in the insurance industry, many policies became hard to obtain, had lower limits, had higher deductibles, or simply cost too much to continue at the current level of coverage. These days it’s not uncommon to see a condo association with a deductible of $25,000 or even $50,000. If the damage to the building is spread among 25 residents, the deductible is much easier to afford than if the damage is limited to one or two units.

 If your condo association has opted for higher deductibles, inform your unit owners in writing of their exposure. Unit owners can purchase their own property policies to cover any losses not handled by the condo association policy, thus reducing the amount they’re responsible for should disaster strike. Paying  $25,000 – $50,000 to cover the association’s deductible isn’t in everyone’s budget. Unit owners who currently have property policies should confirm with their personal agent that their policy would cover the deductible in the event of damage. 

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Flickr photo credit: turbojoe_(away)

If you’re watching your condo association insurance costs these days, you’ve seen the trend. Insurers are passing on higher and higher deductibles to associations – sometimes to the tune of $10,000. And associations are having difficulty adjusting to the higher costs. In fact, associations facing mounting deductibles are often looking for places to transfer that cost. That means some unit owners are now coughing up extra for the additional deductible amounts in the form of higher association fees.

It stands to reason that associations would choose to pass the additional cost on to the owners. Most associations now include insurance costs in association fees. Because much of the liability stems from owner activity, associations feel justified in including the deductible charges in association fees. But some associations are considering passing that cost on only to those owners who receive the insurance benefits paid for by the premiums. While that’s a more just way of handling the situation, it’s unlikely that a smaller group of owners would be able to take on the deductible. Also, the association may have to go through the expensive legal process of assigning negligence to the owners, which may not be successful.

The best solution is to spread the cost among all unit owners. Also, it’s good practice to help your owners understand your basic insurance coverage, what actions or inactions on their part affect rates, and how that affects their costs through higher association fees.

However, not all policies allow condo associations to pass deductibles on to their resident owners. Some grandfathered policies stipulate that condo associations are responsible for both premiums and deductibles. Check the policy language, and also go over your association’s Declarations to determine if passing such costs onto owners is possible. If not, talk with your insurer and see if changes can be made to your Declarations section in order to reduce the condo association’s financial liability.

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Homeowner associations are under constant pressure to keep costs down.  With the natural disasters that have occurred in the past year or so, the pressure is growing as insurance costs increase and are easily the largest expense in the budget. 

Many Condominium and other community associations have considered self-insurance as an option.  Self-insurance can reduce an associations’ premium by 20-40%.  As good as that sounds, self-insurance should be fully investigated before jumping in.

What is self-insurance? 
In a very loose interpretation, self-insurance is a typical property/casualty policy with an extremely high deductible in which the association is responsible for paying claims less than the deductible.  State regulations to self insure Condominium, Cooperatives, Homeowners’, and Timeshare associations vary and must be carefully reviewed for your particular state and circumstance.  

Those in favor of self-insurance feel that in their particular case the possiblility of a major catastrophe affecting all members of the plan is so remote and unlikely that the benefits outweigh the risks. 

Those against self-insurance think that should a catastrophic event occur they would be financially unable to pay the claims in the instance of full replacement coverage.

If you think self-insurance is something to look into, contact an independent agent with access to multiple markets who specializes in insurance for community associations.