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Insurance and Deductibles
Our current Condo Insurance Policy (HUB) shows the highest Insurance deductible as $25000 for water-sewer related claim / $30000 if vacant unit.
Our Board set $35000 aside & plan to build it HIGHER in untouchable “deductible savings account” ( from Operating monies ) and raise fees to do so. ( In case deductible goes up next year I guess??) Essentially Owner monies have been creating a mini “Reserve Fund” of Operating money.
The actual RF benefits from surplus Operating as well, with portions of Operating surplus being transferred into it at year end too. (Over $20k in past 5 yrs). So would the fees increasing be a bit of a cash grab from Owners’ pockets these past 5 years?? We have lived in community less than 5 years
Does deductible have to be sitting in savings for perpetuity? Does the deductible get paid up front in an insurance claim or deducted from the settlement costs and paid then?
Our self-managed Board Treasurer claims, & has convinced the Board , the deductible (this Operating $$ ) has to be in an untouchable Operating savings acct or we cannot get insurance for our Corporation. HUB says having the deductible set aside is a good idea, but not a requirement.
Does anyone know how insurance claims get handled? Do contractors want to see the deductible $$ is there before they start to work?
Are any or some of these Treasurer / Board claims more disinformation or misinformation than actual solid financial policy?
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5 Replies
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Just one person’s opinion: Having some funding available to fund an insurance deductible is wise. Deductibles are very large these days compared to the past.
The alternative would be s special assessment when a claim occurs. I believe the board of a condo can make that decision. When updating one’s bylaws, it might be a consideration.
In my experience, there are many folks who do not want the condo to have adequate reserves and just want special assessments when needed. I do not like that kind of system, but it is an owner decision.
A key question: how quickly do you try to build up the account for the deductibles?
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From an insurance perspective, it is a good idea for a Board to have funds set aside, especially because of the higher deductibles Corporation’s are facing. I don’t believe not having the funds would preclude the Board from obtaining insurance. Many Corporation’s suffer small losses that are below deductible, and having the funds set aside would allow the Board to pay for these smaller losses as opposed to having to special assess. In terms of how claims are handled, typically the deductible is required up front.
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