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How Do Condo Associations Pay Their Condo Association Insurance Costs?

by Bill Garrity

Condo association insurance policies, like all insurance policies, have various costs associated with them. Condo associations have to pay premiums to get coverage, and deductibles must be paid for any claims. Here’s a look at how condo associations in Massachusetts often manage these expenses.


How Do Massachusetts Condo Associations Afford the Costs of Their Condo Association Insurance Policies?

Expenses Are Paid By Condo Associations, But Costs Are Passed Onto Condo Owners

The various expenses associated with condo association insurance policies are usually paid directly by condo associations. Since associations are the actual policyholders, they receive and actually pay the bills.

Policies’ costs, however, are typically passed onto individual condo owners. Although individual condo owners don’t normally write checks to an insurance company for their complex’s condo association policy, they ultimately provide the funds needed for coverage. There are a couple of ways condo associations might pass on a policy’s costs.

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Condo Association Insurance Premiums Are Passed On Through Annual Assessments

Condominium association insurance policies’ premiums are normally passed onto condo owners through annual assessments.

Most Massachusetts condominium associations divide the annual cost of their association insurance policy by the number of units in their complex. The resulting figure is then added onto each unit’s annual association dues.

For example, assume your condo association’s condominium association insurance policy had an annual premium of $10,000. Also, assume there are 100 condos in the complex. Using this method, each condo owner would have to contribute $100 ($10,000 / 100 people = $100 per unit) towards the association’s insurance premiums. If someone owned multiple units, they’d contribute $100 for each unit they had.

In a few cases, a slightly different method that takes into account the size of a unit is used. For instance, a penthouse owner might shoulder a larger portion of the association dues -- and policy premiums -- than someone who only had a small condo in the complex. Such methods still try to fairly distribute a condominium association insurance policy’s premiums across all condo owners, though.

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Deductibles Are Passed On Through Annual or Special Assessments

Deductibles are passed on in much the same way, by fairly spreading the cost of a deductible across all condo owners. A claim’s deductible, however, may be passed on through either an annual or a special assessment.

When a condo association has enough funds in a savings account to cover a claim’s deductible, the association may pay the deductible out of savings. The amount taken from savings can then be added onto the next annual assessment, which gives condo owners time to prepare for the extra expense.

If a condo association doesn’t have enough in savings to cover a deductible (or doesn’t want to take the funds from its savings), then a special assessment is normally used. An irregular special assessment lets a condo association raise the money it needs to cover a deductible regardless of the time of year.

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Refunds May Go into Savings or Be Given to Condo Owners

Occasionally, an insurance company will issue a refund or reimbursement for a portion of the payments made for a policy. If a condo association receives a refund or reimbursement, the money may be put into the condo association’s general fund or savings, or returned to condo owners. The decision is usually up to a condo association’s board or members.

Ask a Massachusetts Agent for Help with Your Condo Association's Policy

For help managing your association’s condo association insurance policy, contact a Garrity Insurance agent. Not only can our independent agents help you understand the protections that your association’s policy provides, but they often can also share how other condo associations in Massachusetts have dealt with policies’ costs and other insurance issues that your association might be facing.

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