Does HO6 Cover the Master Policy Deductible?

Owning a condominium involves a dual insurance structure: a master policy for the overall building and an individual HO6 policy for the unit owner. A common question arises when damage occurs: can an HO6 policy cover the master policy’s deductible? Understanding this interaction helps condo owners avoid unexpected financial burdens.

Understanding Condo Insurance Policies

Condominium ownership involves two primary insurance policies. The master policy, owned by the condominium association, typically covers the building’s structure, common areas like lobbies and hallways, and shared property such as roofs and exterior walls. Master policies vary, commonly including “bare walls-in” (or “studs-in”) and “all-in” (or “all-inclusive”) types.

A “bare walls-in” policy covers only the building’s structure up to the interior surface of the unit walls, leaving interior finishes and fixtures to the unit owner. An “all-in” policy extends coverage to the building, fixtures, and sometimes improvements within the units.

The HO6 policy is the individual insurance policy for the unit owner. It covers personal property within the unit, such as furniture and clothing. It also provides coverage for the unit’s interior structure, including walls, floors, ceilings, and built-in fixtures. An HO6 policy also includes personal liability protection, covering legal expenses if the owner is sued for accidentally harming others or damaging their property.

The Master Policy Deductible

The master policy’s deductible is the amount the condominium association must pay before its insurance coverage begins for a covered loss. This deductible applies to damages affecting the building’s common elements or structure, such as roof leaks, shared pipes bursting, or extensive exterior damage from a storm.

Associations may assess unit owners for a portion or all of this deductible, especially when large claims deplete reserves or bylaws allow it. Deductibles can range from $5,000 to over $100,000, and associations might distribute this cost among unit owners.

Assessment methods vary; costs may be divided equally or allocated to specific unit owners if damage originated from their unit due to negligence. Unit owners could face substantial out-of-pocket expenses. This financial responsibility is typically outlined in the association’s governing documents, like the declaration or bylaws.

HO6 Coverage for Master Policy Deductibles

An HO6 policy can cover a unit owner’s share of the master policy deductible through “Loss Assessment Coverage” or “Special Assessment Coverage.” This endorsement protects unit owners from financial assessments levied by the association for unexpected expenses, specifically when the association charges unit owners for a portion of its master policy deductible after a covered event.

Loss Assessment Coverage helps pay a unit owner’s share of an assessment when the master policy’s coverage limits are exhausted or the deductible is allocated to unit owners. For example, if the association levies a $10,000 assessment per unit for a fire damage deductible, this coverage, up to its limit, would help the owner pay.

This coverage typically applies to assessments for perils also covered under the individual HO6 policy, such as fire, wind, or water damage. It often has limitations, including per-occurrence limits and sometimes aggregate limits for all covered losses within a policy period.

Standard HO6 policies may include a nominal amount of Loss Assessment Coverage, such as $1,000. However, unit owners often need to purchase additional coverage to align with higher master policy deductibles. This coverage generally does not extend to assessments for routine operating expenses, capital improvements, or maintenance unrelated to a covered loss. To mitigate financial exposure from large master policy deductibles, unit owners should ensure their HO6 policy includes sufficient Loss Assessment Coverage.

Essential Steps for Condo Owners

Condominium owners should review their association’s governing documents, including the declaration and bylaws. These documents outline the association’s insurance responsibilities, master policy type, and procedures for allocating costs like deductibles among unit owners. Understanding these provisions helps determine potential financial liabilities.

Unit owners must assess their HO6 policy needs with their insurance agent. This review should focus on the scope and limits of their Loss Assessment Coverage to ensure it adequately covers their potential share of the master policy deductible. Adjusting coverage limits to match or exceed the master policy’s deductible amount is a prudent step to mitigate out-of-pocket expenses.

Understanding the distinction between damages that are the individual unit owner’s responsibility and those covered by the master policy is also important. For example, a leak from an internal appliance is typically the owner’s responsibility, while a burst common pipe affecting multiple units falls under the master policy. Clarifying these scenarios helps owners anticipate when the master policy deductible might apply and their financial obligations.