Guide
Who Pays the Master Policy Deductible in a Condo or HOA?
Who Pays the Master Policy Deductible in a Condo or HOA?
When an association raises its master policy deductible, who actually pays it, the association or the unit owner? Here's how boards should handle it.
When an association raises its master policy deductible, who actually pays it, the association or the unit owner? Here's how boards should handle it.
As insurance costs climb, boards are increasingly accepting higher deductibles to keep their master policy premium affordable. Raising the deductible can make sense, but it raises a fair question: when a claim hits, who is actually responsible for paying that deductible, the association or the unit owner?
Start With Your Governing Documents
Most association documents spell out who pays the deductible under a master policy. In many cases, that responsibility falls on the association. That can be a budgeting headache, because every deductible the association absorbs comes out of its own funds, and there is no reliable way to predict how many claims a community will have in a given year. A few bad claims can push a budget into the red in a hurry.
Other documents are more specific, requiring unit owners to cover the deductible for damage that occurs inside their own unit. And some documents are silent on the question entirely. Where the documents say nothing, many boards apply the maintenance model: since owners are already responsible for maintaining the interior of their units, the board holds them responsible for interior damage as well.
The takeaway is simple. Before you assume anything, read your documents and confirm what they actually say about deductibles.
Changing Who Pays
If your board decides that a change would serve the whole community better, that change usually requires an amendment to the governing documents. The amendment has to be drafted and presented to the unit owners for review and a vote. It is not something a board can simply decide on its own.
Shifting the deductible to unit owners is not as harsh as it might sound. Many unit owner HO-6 policies can cover this expense through loss assessment coverage, which exists for exactly this kind of situation. Every owner should be encouraged to check with their own insurance agent to confirm they carry the right coverage, and a high enough limit, to handle a master policy deductible if one is ever passed along.
Set Up a Small Claims Procedure
Alongside the deductible question, every association should have a procedure for small claims, and a rule of thumb for when not to file at all. Filing a claim that only exceeds the deductible by a small amount usually works against the association.
Here is why. An insurer spends a fixed amount of money to adjust any loss, often several hundred dollars, no matter how small the payout. So a claim that nets the association very little above its deductible can still cost the carrier far more once you add in the adjustment expense. Worse, every one of those small claims lands on the association's loss history, and a busy loss run is one of the first things that drives up the price, or limits your options, at the next renewal.
The fix is to set a sensible threshold for when a claim is worth filing, communicate both the deductible policy and the small claims procedure to every unit owner, and then let owners take the steps they need to protect themselves.
A Stronger Financial Footing
A deductible policy and a small claims procedure do the same quiet job: they keep the association's loss history clean and its budget predictable, which is exactly what underwriters reward. Put both in writing, make sure every owner understands them, and you give your community a more stable financial foundation heading into each renewal.
If you would like help reviewing how your master policy deductible is handled, or making sure your unit owners carry the right HO-6 coverage, our team works with community associations across Western New York. Contact us to start the conversation.
As insurance costs climb, boards are increasingly accepting higher deductibles to keep their master policy premium affordable. Raising the deductible can make sense, but it raises a fair question: when a claim hits, who is actually responsible for paying that deductible, the association or the unit owner?
Start With Your Governing Documents
Most association documents spell out who pays the deductible under a master policy. In many cases, that responsibility falls on the association. That can be a budgeting headache, because every deductible the association absorbs comes out of its own funds, and there is no reliable way to predict how many claims a community will have in a given year. A few bad claims can push a budget into the red in a hurry.
Other documents are more specific, requiring unit owners to cover the deductible for damage that occurs inside their own unit. And some documents are silent on the question entirely. Where the documents say nothing, many boards apply the maintenance model: since owners are already responsible for maintaining the interior of their units, the board holds them responsible for interior damage as well.
The takeaway is simple. Before you assume anything, read your documents and confirm what they actually say about deductibles.
Changing Who Pays
If your board decides that a change would serve the whole community better, that change usually requires an amendment to the governing documents. The amendment has to be drafted and presented to the unit owners for review and a vote. It is not something a board can simply decide on its own.
Shifting the deductible to unit owners is not as harsh as it might sound. Many unit owner HO-6 policies can cover this expense through loss assessment coverage, which exists for exactly this kind of situation. Every owner should be encouraged to check with their own insurance agent to confirm they carry the right coverage, and a high enough limit, to handle a master policy deductible if one is ever passed along.
Set Up a Small Claims Procedure
Alongside the deductible question, every association should have a procedure for small claims, and a rule of thumb for when not to file at all. Filing a claim that only exceeds the deductible by a small amount usually works against the association.
Here is why. An insurer spends a fixed amount of money to adjust any loss, often several hundred dollars, no matter how small the payout. So a claim that nets the association very little above its deductible can still cost the carrier far more once you add in the adjustment expense. Worse, every one of those small claims lands on the association's loss history, and a busy loss run is one of the first things that drives up the price, or limits your options, at the next renewal.
The fix is to set a sensible threshold for when a claim is worth filing, communicate both the deductible policy and the small claims procedure to every unit owner, and then let owners take the steps they need to protect themselves.
A Stronger Financial Footing
A deductible policy and a small claims procedure do the same quiet job: they keep the association's loss history clean and its budget predictable, which is exactly what underwriters reward. Put both in writing, make sure every owner understands them, and you give your community a more stable financial foundation heading into each renewal.
If you would like help reviewing how your master policy deductible is handled, or making sure your unit owners carry the right HO-6 coverage, our team works with community associations across Western New York. Contact us to start the conversation.
