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Condo. building insurance deductibles

Started by JackR9 • 14 replies • 574 views

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JackR9 (New Hampshire)
Posts: 8
Posted:
HI all,

Just trying to get an idea of insurance deductibles for a master policy for a condo. association. Right now we have an $1,000 deductible, but we're being advised by the insurance agent to go higher- $5k maybe $10k. Thoughts?
MaxB4
Posts: 3,513
Posted:
It will lower your premium, BUT less likely you will be able to take advantage of it except in large cases.
TimB4 (Tennessee)
Posts: 21,062
Posted:
I agree with Max.

If your association is tight on money, I wouldn't do it.

Worst case, If a Hurricane hits your area next week can you more easily $1K, $5K or $10K?
BillH10 (Texas)
Posts: 1,217
Posted:
Tim

Hurricanes in New Hampshire? Reminds me of the salsa commercial some years ago about salsa from New York City and the consternation of the cowboys around the campfire.

I am a former Air Force Air Weather Service guy. Hurricanes do get that far north, the big one was in 1939 which took out much of the East into New England. A few others have made it that way since.
CathyA3 (Ohio)
Posts: 6,299
Posted:
Our deductible is $10,000. Our agent advised us some years back that condo deductibles have been rising across the county, and $10,000 is pretty common. Also, our homeowners' HO6 policies are written to cover the association's deductible in the event there is damage to a unit. We have to carry all-included insurance, though, and this may make a difference.

There is a benefit to discouraging smaller claims, since having too many small claims can result in higher premiums or even make your association uninsurable if you've gone overboard. We've paid out-of-pocket when a potential claim was reasonably close to the deductible, just to minimize the number of claims we make.

If funds are tight, there are other ways to save money on premiums. It may be less convenient to spread your coverage out among two or more companies, but this approach saves us several grand per year.

Talk to your insurance agent - a good one can be very helpful in saving you money without taking on unnecessary risk. (I agree with other posters that this is one area you don't want to cut corners.)
SheliaH (Indiana)
Posts: 6,964
Posted:
Quote:
Posted By BillH10 on 02/22/2023 5:58 PM
Tim

Hurricanes in New Hampshire? Reminds me of the salsa commercial some years ago about salsa from New York City and the consternation of the cowboys around the campfire.

I am a former Air Force Air Weather Service guy. Hurricanes do get that far north, the big one was in 1939 which took out much of the East into New England. A few others have made it that way since.



These days, it seems anything is possible weather-wise - as I write this, the east coast may be getting 80-degree weather while the Midwest may be hit with lots and lots of snow. We can't predict the weather, but I think HOA boards and condo boards are going to have to keep this in mind as they review insurance coverage. Homeowners should do the same - I purchased loss prevention coverage for my policy years ago and that was part of the reason. The other was the state of our reserve fund, while I pray we never face a special assessment scenario, all it takes is a nasty blizzard or tornado around here to turn things upside down.
If it is not right do not do it; if it is not true do not say it. Marcus Aurelius
CathyA3 (Ohio)
Posts: 6,299
Posted:
Hurricane Sandy (2012) did a lot of damage to the east coast, especially flooding. Hurricane Ike (2008) barreled up the Mississippi - my sister who was living in Indianapolis said they just had a lot of rain, but Cincinnati got Category 1 winds and by the end of the day 95% of the area was without power. Fortunately that happened in September when the area usually has great weather.

Our insurance agent said that a lot of the increases in community insurance premiums is due to the extreme weather events. And it isn't just the insurance that's going up. The noticeable increase in wacky weather plus higher inflation rates mean that many communities' reserve studies underestimate the cost to replace major components. Prices will be higher, and repairs will occur sooner. A similar double whammy is hitting routine operating repairs as well. Fun times...
BillH10 (Texas)
Posts: 1,217
Posted:
Cathy, your point is well taken--

We are in the Dallas-Fort Worth Metroplex. We are far enough north of the Gulf Coast hurricanes do not hit us full force. The folks along the coast are seeing significant increases because of their exposure.

We do have significant hail losses and the tornado risk is increasing. I have been telling clients for two years insurance costs will be going up, what I did not expect was the cost increase for a 4x8 sheet of plywood for roof decking as an example of the increases of the cost of materials.

I have suggested the Reserve Studies need to be refreshed, mostly it is falling on deaf ears as the Boards do not wish to face assessment increases. Sounds like Surfside, Texas style.
BillH10 (Texas)
Posts: 1,217
Posted:
Cathy, your point is well taken--

We are in the Dallas-Fort Worth Metroplex. We are far enough north of the Gulf Coast hurricanes do not hit us full force. The folks along the coast are seeing significant increases because of their exposure.

We do have significant hail losses and the tornado risk is increasing. I have been telling clients for two years insurance costs will be going up, what I did not expect was the cost increase for a 4x8 sheet of plywood for roof decking as an example of the increases of the cost of materials.

I have suggested the Reserve Studies need to be refreshed, mostly it is falling on deaf ears as the Boards do not wish to face assessment increases. Sounds like Surfside, Texas style.
SheliaH (Indiana)
Posts: 6,964
Posted:
Quote:
Posted By BillH10 on 02/23/2023 8:58 AM
Cathy, your point is well taken--

We are in the Dallas-Fort Worth Metroplex. We are far enough north of the Gulf Coast hurricanes do not hit us full force. The folks along the coast are seeing significant increases because of their exposure.

We do have significant hail losses and the tornado risk is increasing. I have been telling clients for two years insurance costs will be going up, what I did not expect was the cost increase for a 4x8 sheet of plywood for roof decking as an example of the increases of the cost of materials.

I have suggested the Reserve Studies need to be refreshed, mostly it is falling on deaf ears as the Boards do not wish to face assessment increases. Sounds like Surfside, Texas style.



Yup.

Just consider this recent conversation on rejecting a budget because owners didn't want to pay a higher premium for insurance -https://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/345322/view/topic/Default.aspx

These folks (Florida again) said ain't no way and why can't we use "all that money" in reserves??????? Nobody wants to pay more, but better a reasonable increase in assessments than being presented with a special assessment of several thousand dollars or more because there's not money in reserves and the operating budget to pay for a hurricane that wrecked the community.....
If it is not right do not do it; if it is not true do not say it. Marcus Aurelius
TimB4 (Tennessee)
Posts: 21,062
Posted:
Quote:
Posted By BillH10 on 02/22/2023 5:58 PM
Tim

Hurricanes in New Hampshire? Reminds me of the salsa commercial some years ago about salsa from New York City and the consternation of the cowboys around the campfire.

I am a former Air Force Air Weather Service guy. Hurricanes do get that far north, the big one was in 1939 which took out much of the East into New England. A few others have made it that way since.

You focused on the fact that I used hurricanes as an example vs. the actual intent of the post - does the Association have the money to cover such deductibles?
JeffT2 (Iowa)
Posts: 880
Posted:
Start by finding out how much will you save on insurance premiums by raising your deductible from $1,000 to $5,000 (or $10,000). Can you tell us those amounts? When will the savings equal the extra cost of paying the extra deductible when there is unexpected damage?

Suppose you can save $2,000 per year (for $5,000 deductible), which will be $6,000 saved over three years. However, you anticipate a large claim every three years based on your past experience, so you have to pay $5,000 for the deductible portion, which is $4,000 more than your current $1,000 deductible. So you save $6,000, but you have to pay $4,000 more in the deductible. That is still a net gain of $2,000 over three years compared to your current plan.

Keep in mind that you are also taking on greater risk.

You also have to consider where your association will come up with the $5,000 or $10,000 that you will need when there is damage. You may be able to absorb your current deductible of $1,000 from your operating budget, but where are you going to get $10,000? Borrowing from reserves is not a good idea. Some recommend establishing a deductible fund equal to two to three deductibles in addition to your reserves.

If you don't already have one, you will need to line up good contractors/repairmen, because you won't have an insurance adjuster giving you advice on damage that is less than the deductible.
MaxB4
Posts: 3,513
Posted:
Being this is a condo unit, the unit owner also has to be considered, as if they place a claim on the policy, they will be liable for the deductible, which in this case is substantial, meaning they may be out of luck in filing a claim.

Depending on the loss run, many insurance companies will force a higher deductible to quash as many claims as possible. Remember, they are the stingiest people on earth.
TimB4 (Tennessee)
Posts: 21,062
Posted:
One could create an insurance deductible fund.

see: INSURANCE DEDUCTIBLE from davis-stirling
MelissaP1 (Alabama)
Posts: 13,836
Posted:
In general I find you set the deductible at a rate can afford to pay out of pocket without having to tap into any other money resource. Will you have to have a special assessment to pay the deductible? That may be too high. If you have that in savings, then that is good.

Our deductible was set around 20K. It allowed us to have lower monthly payments. Plus able to only pay 10 months out of 12. That meant we could have the extra $4.5K we paid to put back into our budget for 2 months a year.

I would do an overview of what your insurance covers. I found out things like if our clubhouse had burnt down, the insurance coverage would never cover the full replacement cost. We'd have to pay the 20K deductible AND the difference in rebuilding costs. This meant we may want to consider raising our insurance coverage.

There is no one size fits all for insurance. Need to talk to an insurance company to find out what your HOA may or may not need. Be aware they do often do "Packages" for coverage for HOA's. Which means you may be stuck with some coverages don't need to use. (HOA vehicle example).

Former HOA President

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