Condo Media - April 2018 - 36

DEDUCTIBLE is a Dirty Word

The Scenario
Your upstairs neighbor
opens his faucet and starts
running the water into his
tub. The telephone rings and
he leaves the room to answer
it. He becomes involved in
a heated conversation with
a business associate and
forgets all about taking a
bath. The tap continues to
run in the bathroom and the
tub overflows.
You arrive home to
find that gallons of water
have entered your unit
from above. The ceiling in
your recently renovated
bathroom is on the floor,
the tiles are hanging off the
walls, your vanity is soggy,
and your lighting fixture is
ruined. You are distraught
to say the least, but then you
remember that your selfmanaged association has a
master insurance policy.
36

CONDOMEDIA

THE REALITY
You discover the reality of how the master insurance policy works at your selfmanaged community and you hear that
dirty word: deductible. Of all the tasks
the self-managed board must undertake,
insurance procurement is one of the
most difficult.  
As prescribed in the condominium
documents, the board is called upon to
provide insurance that will protect the
property in a covered loss, as detailed in
the policy. It requires an understanding
of the value of the buildings, the cost
to rebuild, any additional construction
needed to bring it to the current building
and fire codes, along with any demolition
that may be needed. The self-managed
board must understand insuring to
value, coinsurance, and replacement
cost to approve the limits for the policy.
And then there is, of course, the deductible to be considered.
The board of the self-managed
association is required under the
insurance section of the condominium
bylaws to fund restoration after a loss
and repair damage to the property
through policies that are available in
the insurance marketplace.
The master insurance policy is written "per the documents," which define
the common areas and the boundaries
of the unit. Some documents make
the owner responsible for everything
from the "studs in" or provide for "bare
walls" coverage and sometimes the association is responsible for everything
except the owner's personal property.
Some insurance carriers offer other
options like endorsements that provide
all-inclusive coverage, or "all-in" policies, which can make the claim settlement process easier.
Knowing what the documents dictate
is essential to selecting the policy
coverages for the association and for the
homeowners. The insurance agent for
your self-managed board should provide
assistance in interpreting the definition
of the common areas in your documents
and securing a policy that will provide
the best coverage at the best price.

THE FALLOUT
However, under every master insurance
policy, there is a deductible applied
to each property damage claim. Some
condominium documents specify a
maximum deductible for insurance
policies, but many do not have such a
limit. In the past, deductibles of $1,000
were common, but more recently,
higher deductibles of $2,500, $5,000,
$10,000 and even $25,000 have become
available and popular as a strategy
for boards to reduce rising premiums,
especially in properties prone to water
damage claims and ice damming.
If the board of your self-managed
community has chosen a deductible



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Contents
Condo Media - April 2018 - BB1
Condo Media - April 2018 - BB2
Condo Media - April 2018 - Cover1
Condo Media - April 2018 - Cover2
Condo Media - April 2018 - Contents
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