There are standard questions that we ask HOA boards, condo associations, and property managers when reviewing an HOA property insurance policy. One of the most important questions today is: what deductible can your association realistically afford?
In the past, many associations treated the deductible as a small detail. Today, the deductible can be one of the biggest financial planning issues in the entire HOA master policy.
An HOA deductible is the amount the association must pay before the insurance carrier begins paying for a covered claim. This may apply to the building, roofs, common areas, clubhouses, fences, pools, garages, mechanical systems, and other association-owned property, depending on how the policy and governing documents are written.
Below are the main reasons HOA deductibles are higher now, and how your board can prepare before a claim happens.
What Is an HOA Insurance Deductible?
An HOA insurance deductible is the portion of a covered property claim that the association is responsible for paying.
For example, if a storm damages several roofs and the claim is covered, the insurance carrier may subtract the deductible from the claim payment. The association must then fund that deductible through reserves, operating funds, a special assessment, or another approved method.
Some policies have one deductible for most property claims. Others have separate deductibles for wind, hail, named storm, water damage, flood, or earthquake. In some cases, the deductible may be a flat dollar amount. In other cases, it may be a percentage of the insured building value.
Why Are Weather Losses Making HOA Deductibles Higher?
Weather-related claims have become a major concern for property insurers. Hail, wind, wildfire, freeze, flood, and severe storms can affect many buildings at once, especially in townhome, condo, and HOA communities.
When an insurer believes a property has a higher chance of a large loss, the carrier may increase the premium, increase the deductible, limit coverage, or all three.
This is especially true for associations with large roofs, older buildings, high replacement costs, or properties located in areas with frequent storms. Industry reports continue to point to natural catastrophes and secondary perils like severe storms, wildfire, and flood as major drivers of insured losses.
How Do Rebuilding Costs Affect HOA Deductibles?
The cost to repair or rebuild property has also changed. Materials, labor, contractor availability, code upgrades, and supply chain issues can all affect the total cost of a claim.
For an HOA, this matters because the master policy often covers large shared property items. A roof claim, fire claim, pipe break, or hail loss can involve multiple units or buildings at the same time.
When the possible claim payout is larger, insurers often look for ways to share more of the risk with the insured. One way they do that is through a higher deductible.
Why Are Insurance Carriers Using Higher Deductibles?
Insurance carriers do not only adjust premiums. They also adjust deductibles, exclusions, coverage limits, and underwriting requirements.
During a difficult insurance market, many real estate properties were moved to higher “all other peril”, named storm, wind, or hail deductibles. Even as some parts of the property insurance market become more stable, industry commentary notes that many higher retentions and deductibles remain in place.
This means an HOA may not automatically receive a lower deductible just because the market improves. The association’s location, age, loss history, construction type, roof condition, maintenance records, and financial planning can all affect what options are available.
Building Maintenance Matters
Insurers want to know whether the association is maintaining the property. Deferred roof work, old plumbing, outdated electrical systems, poor drainage, unrepaired sidewalks, and aging mechanical equipment can all create claim concerns.
For HOA communities, maintenance and long-term capital planning can influence insurance pricing and availability. Reports submitted to the NAIC have specifically noted that HOAs face challenges related to building maintenance, litigation exposure, and higher property insurance costs.
A strong maintenance plan does not guarantee a low deductible, but it can help the association present itself as a better risk.
Claims History Can Affect the Deductible
Previous claims are another important factor. If an association has had repeated water damage claims, roof claims, liability claims, or weather-related losses, carriers may view the community as a higher risk.
The insurer may ask questions such as:
What caused the prior claims?
Were repairs completed?
Were preventative steps taken?
Were the same types of losses repeated?
Did the association update maintenance procedures after the claim?
A board that can show corrective action may have better options than a board that simply reports the loss and moves on.
How High Deductibles Affect Homeowners
A high HOA deductible can eventually affect individual homeowners.
If the association does not have enough money set aside, the board may need to consider a special assessment. In some cases, individual homeowners may look to their unit-owner policy for loss assessment coverage, depending on the situation and the policy language.
This is why HOA master policy planning and owner education should work together. StarNet’s HOA Property Insurance page notes that when a master policy has a large deductible or shortfall, owners can sometimes be assessed, and many unit-owner policies offer loss assessment coverage for eligible assessments.
Review Your Deductibles Before Renewal
Do not wait until a claim occurs to understand the deductible.
Your board should review each deductible before renewal and ask whether it applies per building, per occurrence, per unit, or by percentage. A percentage deductible can be especially important because it may be based on the insured value of the building, not the amount of the claim.
The board should also ask whether different deductibles apply to wind, hail, water damage, flood, earthquake, or named storm losses.
Build a Deductible Plan Into the Budget
An HOA should plan for the deductible the same way it plans for roofs, paving, elevators, gates, pools, and other major property expenses.
This may include increasing reserves, creating a separate insurance deductible fund, reviewing the reserve study, or discussing assessment authority with legal counsel.
The goal is not only to buy insurance. The goal is to make sure the association can actually use the policy when a covered claim occurs.
Do Your Governing Documents Match Your HOA Insurance Coverage?
Your association’s declarations, bylaws, and rules may explain who is responsible for certain repairs and how deductibles or assessments are handled.
This is especially important in communities where the line between association responsibility and unit-owner responsibility is not obvious. Some HOA master policies are written on a bare walls basis, while others may provide broader single entity or all-in coverage. StarNet helps associations match coverage to governing documents so there are fewer surprises at claim time.
Educate Homeowners About Loss Assessment Coverage
Homeowners may not understand that an HOA master policy does not always protect them from every out-of-pocket cost.
Boards should encourage owners to speak with their personal insurance agents about their unit-owner policy, personal property, liability, interior improvements, and loss assessment coverage.
This is not a substitute for the HOA master policy. It is a way to help owners understand how their personal coverage may respond if the association has a deductible or assessment issue.
Reduce Risk Where Possible
Insurance is only one part of the plan. Risk management is also important.
Associations can reduce claim potential by inspecting roofs, cleaning gutters, maintaining drainage, trimming trees, repairing trip hazards, winterizing pipes, updating electrical systems, checking fire protection systems, and responding quickly to water leaks.
Good maintenance may help reduce claims, support better underwriting conversations, and protect the association’s budget.
Shop the Policy Early
HOA insurance should not be reviewed at the last minute.
Boards should begin the renewal process early and provide complete information to the insurance broker. Helpful information may include roof age, updates, inspections, reserve studies, loss runs, building values, construction details, photos, maintenance records, and details about any recent improvements.
A complete submission can help carriers better understand the property and may improve the association’s chances of receiving competitive options.
Questions Your HOA Board Should Ask
Before accepting a renewal, ask:
What is our all other perils deductible?
Do we have a separate wind, hail, named storm, flood, or water damage deductible?
Is the deductible a flat amount or a percentage?
Does the deductible apply per building, per occurrence, or another way?
Do our reserves include enough money for the deductible?
Can the association assess owners for the deductible if needed?
Should owners review their loss assessment coverage?
Are our building values current?
Do our governing documents match our insurance coverage?
These questions can help prevent confusion later.
Final Thoughts
HOA deductibles are higher now because insurers are responding to larger property losses, higher rebuilding costs, weather risk, claims history, maintenance concerns, and changing insurance market conditions.
For an HOA board, the best response is preparation. Review the deductible, understand the coverage, plan the budget, educate homeowners, and work with an experienced insurance broker before renewal.
At StarNet Insurance Group, we're here to help you navigate the complexities of insurance. Please feel free to contact us with any questions you may have.
