Master insurance premiums on older Boston masonry buildings have risen sharply. Associations facing those renewals had two options: raise the monthly fee, or raise the master policy deductible.
A great many chose the deductible, because the fee is the number that appears in marketing and the deductible is the number nobody reads.
That choice moved risk from the association's balance sheet onto individual owners. Here is how it lands on you.
The two-policy structure
The master policy covers the building. What exactly it covers depends on whether the association carries a bare walls, single entity, or all-in policy — three meaningfully different standards that determine whether your kitchen cabinets are the association's problem or yours.
Your HO-6 policy covers what the master does not: your unit's interior, your belongings, your liability, and — critically — loss assessment.
The gap between the two is where owners get hurt, and the size of that gap is set by the master policy's deductible and coverage form.
The deductible math
Say the master deductible is $50,000 and a pipe fails, producing $180,000 in damage across four units. The master policy pays $130,000. The remaining $50,000 has to come from somewhere.
Under most declarations of trust, it gets assessed to the unit owners. In a fifty-unit building that is $1,000 a door. In a six-unit South End brownstone conversion, it is more than $8,000 a door.
That is what a loss assessment is, and it is why the master deductible is a number that belongs in your purchase decision.
Loss assessment coverage is the cheapest fix in real estate
Your HO-6 policy can carry loss assessment coverage, which pays your share of an assessment arising from a covered loss. Many policies include a small default amount — often $1,000 — which is nearly useless against the deductibles now common in this market.
Increasing that limit typically costs a small amount annually. Ask your agent what it costs to raise it to a level that actually matches your building's master deductible and your percentage interest. It is one of the few genuinely cheap protections available to a condo owner.
Two things to confirm with your agent, because coverage terms vary:
- Whether your loss assessment coverage responds to an assessment arising specifically from the master policy deductible
- Whether it covers assessments from liability claims as well as property damage
What to request, and what to read in it
For any building you own or are buying:
The master policy declarations page. Not a summary. The declarations page.
The deductible. Both the standard deductible and any separate wind, water, or named-storm deductible, which can be structured as a percentage rather than a flat amount.
The coverage form. Bare walls, single entity, or all-in. This determines what your HO-6 needs to cover on the interior.
Claims history. Five years. A building with repeat water claims is a building with a premium problem coming.
Flood coverage, separately. Standard property policies do not cover flood. In a mapped zone or anywhere near the water, ask whether the association carries flood coverage, at what limit, and with what deductible. Boston's Coastal Flood Resilience Overlay District extends beyond FEMA's mapped high-risk areas, and in many newer buildings the mechanicals, electrical, and parking sit at or below grade — so a storm that never reaches your floor can still produce an assessment.
The trend to watch in the minutes
Read twelve to twenty-four months of board minutes with insurance specifically in mind. What you are looking for:
- A renewal discussion where the premium jumped and the board raised the deductible to hold the fee flat
- Any mention of a carrier declining to renew
- Discussion of a claim, and what it cost
- Any consultant or broker engaged to shop the policy
A board that raised the deductible to protect the fee has made a defensible decision under pressure. But it has also increased the size of any future assessment, and as a buyer you should price that.
For small associations, this is the main event
A three-unit triple-decker conversion or a six-unit brownstone has no economy of scale. The same $50,000 deductible that costs $1,000 a door in a large building costs $16,000 a door in a three-unit association.
If you are buying into a small association, the master deductible divided by your percentage interest is arguably the single most important number in the entire document package. Calculate it. Then make sure your loss assessment coverage is at least that large.
What to do this week if you already own
- Pull your association's master policy declarations page.
- Find the deductible and divide by your percentage interest. That is your exposure.
- Pull your own HO-6 policy and find your loss assessment limit.
- If the second number is smaller than the first, call your agent today.
Most owners discover this gap after a claim. It takes twenty minutes to discover it before one.
If you are buying a condo and want help reading the insurance side of the document package, send me the building. This is one of the two or three things I look at first, and it is the one buyers most often skip.
Chris Remmes, Managing Broker, Remmes & Co. [email protected] | 617-398-0015
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