Along with the rising cost of everything else, deductibles for homeowner’s associations and condo associations have gone up exponentially. This is based on a number of things, ranging from the rise in claims due to weather-related events, as well as the overall worth of the properties within the HOA. Since the deductibles are paid for by the HOA (in the case of a loss or damage to a property), they affect everyone who belongs, and sometimes, a special assessment is necessary in order to pay them.
There are several things board members should be aware of when it comes to paying HOA insurance deductibles and levying special assessments.
Understanding HOA Insurance Deductibles
What’s the difference between HOA insurance and homeowner’s insurance? One covers the common spaces within the property, while the other covers each individual home. Common spaces that range from community buildings, pools and pool houses, tennis courts to simpler things like sidewalks, hallways, and parking spaces, are all covered by the HOA policy. When damages occur, the insurance deductible will need to be paid before the insurance covers the other repair costs. This deductible amount comes from the HOA funds, but it’s everyone’s responsibility.
There are two main types of HOA deductibles, including flat-dollar deductibles that consist of a single amount, like $5,000, that must be paid every time that a major claim is called in. The other type is percentage based, which consists of a percentage of the claim amount, like 10 or 15%.
Why Have Deductibles Increased?
Insurance deductibles for HOAs have gone up quite a bit due to the rising number of severe weather events in the area. This, combined with rising construction costs (particularly those of rebuilds) and higher property claim costs, due to the worth of homes and other buildings, explains some of the reasons why. Additionally, major changes to the insurance market haven’t helped.
When Can Special Assessments Happen?
Right after a major event, it’s important to call in your insurance company and let them determine your coverage and deductible amounts. Once you have those numbers, in most cases, you can call for a special assessment on your homeowner’s, forcing them to pay for some or all of the deductible. This depends largely on your HOA policies and guidelines, but in most cases, you can call for special assessments if one of the following happens:
- Major roof damage
- Fire losses
- Storm damage
- Water damage affecting common areas
- Multiple buildings requiring repairs
How HOA Boards Can Better Prepare Before a Claim
Ensuring that you have the right insurance policies is only part of what you, the HOA board, can do to be prepared before a claim happens. It’s also important to educate your residents on what the insurance deductibles are, as well as how the special assessment process works. You’ll deal with less negative feedback and pushback this way.
Have Questions? Contact Charlotte Insurance
Want to learn more about the importance of understanding HOA insurance deductibles and the effects on your tenants? Contact Charlotte Insurance. Our agents can explore and explain all available options and put together the insurance coverage plan your HOA needs.