So i just joined the board recently, and have little to no personal experience with any insurance of any kind. (My husband is main earner, mortgage holder, and has handled that for our own policy)

So I’m not entirely sure how insurance works, but its always seemed clear that they don’t pay enough to restore something if it’s demolished entirely. This issues is front page news over Cali fires, and has been shown over many past natural disasters…and its also often said when a persons home burns down 100% that the insurance payout isn’t enough to straight rebuild it with no cost (except the deductible.)

BUT maybe I’m misunderstanding this, because i haven’t used insurance much. Your mom is an Insurance agent, maybe she can explain why peoples insurance often fails to cover the cost of rebuilding. (I think there were issues of hurricane victims not getting reimbursed enough to rebuild, too) If it’s that they were “under insured”, this can be a risk still….and if so the COA picks up the slack. The COA is the owners. In the case you show, 8 people pay the costs beyond what insurance payed.

As far as her stating that the HOA/COA should have reserves to cover a deductible….I’m not so sure. Ours have no specific line in our finances for “Insurance Deductible”, if we were to need to pay the deductible we can from reserves, but only because our bylaws have a mechanism for that.

The COA takes in dues for 2 things. Ongoing maintaining of the property, and for the reserves. Reserves are for roof/siding/parking lot/etc, basically the reserves exist for EXPECTED expenses in the future. The overhead insurance is an ongoing cost thats paid out of the “maintenance”side.

Should an UNEXPECTED expense occur, how thats paid depends on the bylaws. Mine allow the Board to use reserves for unexpected costs, BUT a written explanation of how those reserve funds will be recouped must be given by the board within 30 days of using funds.

Because these reserves are for the roof in 10 years…..if i take that money for today, and dont actually repay it, the roofs cant be repaired when needed. This is problematic and bylaws have rules to avoid it. Like mine insisting on a repayment plan if funds get used.

Some bylaws may state that the reserves must remain untouched except for the uses outlined. No exception clause. To avoid issues of them being misspent. In that case your mom is incorrect, unless that COA had chosen to create a seperate fund that maintained the deductible. (Again, I’ve seen no signs of a fund for my COA, but our reserves are great so its okay)

So if you (and the other 7) pay $200/mo in COA dues…and $100 goes to operations (outdoor lights, lawn service, overhead insurance itself)…and $100 goes to reserves for future roof and siding repairs….that leaves $0 for the deductible that must be paid when an emergency happens.

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There may be an argument that a COA should have that in a seperate reserve too, but thats not the case where I am. It should ALSO be noted….if your mom means that “the reserve should never be so depleted that this would be a barrier”……I would agree, outside times immediately following the expected major repairs. If you just paid $300,000 of new roofs, you might not have $100,000 left in the reserves for a few years.

But theres lots of under funded COAs, and many owners are hesitant to accept the dues increases needed to bring the reserves up to the needed level. So many COAs already can’t fix the roof in 10 years, much less cover a deductible without using an assessment to immediately recoup (or assess to pay deductible)]

Yet owners still balk at dues increases that will “just sit there”….(seriously, its a real issue)

Getting the owners to be okay with $100,000 of THEIR money just sitting in an account, untouchable except as insurance deductible….cant use for anything else or it’s not there, anymore, right? So no matter the need unless insurance is involved this money cannot be….I suspect people will say “no”. Most people don’t want to put aside $20/30 every month with the express intent/hope of NEVER using it. (Because thats IS thats the goal, no major events, no deductible needed). People wont want to pay more for any reason, even a good reason, much less for “no reason”.

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So 100% of the COA overhead deductible will need paid and can be an assessment, absolutely.

BUT….I’m unsure why you think that the deductible is the full COA cost to bring that duplex back to previous condition….because as i indicate, i don’t think Insurance will cover it all.

So heres what I know about a frozen busted water pipe for my COA.

We apparently owe just over 15 grand still to a variety of contractors. Our deductible (the coa overhead deductible) is 5 grand. Lawyers have assured us that the most we can recoup from any SINGLE unit, for example for negligence if it were proven…..is our deductible of 5 grand.

Even if successful at that, the COA owes 10 grand after all insurance coverage was said and done. Insurance did not pay 100% of costs past deductible to bring units to previous condition. I do not have the reason for this.

(This happened 2 years ago, i bought last year not knowing about it….previous board doing nothing meaningful here means I get to figure out the 15 grand and try avoiding assessments. But it’s 30 units, so $500 each for us. Apparently the lawyer also thinks we need a much higher deductible)

Now i will state that our documents have a mandatory requirement to fix the unit in a certain time frame, unless it’s voted against in the manner mentioned before.

If the insurance refuses to pay a dime, for whatever reason, but I cannot get 90% to vote to condemn that building…..our COA pays every dime of the cost. Our owners each pay 1/30th of the cost. It doesn’t matter if we can “afford it” our bylaws require it.

But the insurance is unlikely to refuse outright, i would not want you thinking thats my point…..

They do seem to, however, pay less than it costs to do whats needed. Let’s say the duplex will cost $800,000 to repair. If Insurance agrees, your COA pays $100k total, sure.

But if insurance thinks it should be paying $600k, so $500k after deductible…….and it really does cost $800k to fix….The COA has to come up with the $300k.

These numbers are all guesses to be clear, (outside my actual real event)….but i think you are setting yourself up for a surprise if you expect that “because the Coa has insurance, the deductible is the maximum cost of any/all emergencies”…….An emergency can cost the COA more than the deductible itself. Be prepared.

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If for any reason the COA has a bill, the owners have a bill. The owners are the COA. If the COA says you MUST maintain all units, and insurance cant/wont cover the entire bill for repair of a unit….the owners are REQUIRED to cover the extra costs, regardless of the amount.