As I mentioned last week last winter’s record-setting snowfall in MA resulted in unprecedented damage to homes and condos due to ice dams. As a result many insurance carriers have taken steps to mitigate these losses in the future. One change that we are seeing more companies implement is the addition of a per unit ice dam deductible to the association's master policy. Deductibles assigned to one particular peril or cause of loss are not new. Most homeowners along the coast have seen a "wind", "named storm" or "hurricane" deductible on their home policies for years.
Here's how it works. Let's assume that the insurance company implements a mandatory $2,500 per unit ice dam deductible. The association is now responsible for the first $2,500 of damage for each unit. This past winter I had one condo association client suffer ice dam damage in 13 out of 20 units. If this association had an ice dam deductible of $2,500 then their total responsibility could have reached as high as $32,500. (They didn't!)
As I mentioned before the insurance companies are trying to reduce the likelihood of suffering the scale of losses they had this past winter. By implementing an ice dam deductible they are transferring part of the loss onto the association who will then most likely transfer it onto the unit-owners. Fortunately the unit-owners can then easily transfer the risk to the insurance company that insures the unit as long as the unit-owner's policy has Dwelling coverage equal to at least the ice dam deductible with the HO 17 32. See last week's blog for an explanation of the HO 17 32.
For example assume Unit A suffers a $10,000 loss due to ice dams and the association has a per unit ice dam deductible of $2,500. If the owner of Unit A has dwelling coverage of at least $2,500 with the HO 17 32 and a $500 deductible then the Unit A's policy will pay $2,000 of the $2,500 ice dam deductible. Who is responsible for the remaining $7,500 in damage is determined by the by-laws and is the subject for a future blog. Simply put we recommend that our condo clients carry a dwelling limit at least equal to the highest deductible on the association's policy. Of course we automatically include the HO 17 32.
Please call us at 781-598-5000 if you have any questions regarding condo insurance or read more at http://www.columbiainsuranceagency.net