![]() ![]() ![]() There would be an even higher special assessment due if the HOA purchased a $25 million stop-loss limit. That’s a potential special assessment of $60,000 per owner if all buildings were lost. ![]() One Building DamagedĢ0% Deductible = Special Assessment (amount due) TotalĢ0% Deductible = Special Assessment (amount due) Divided by 200 Ownersįor the Sample HOA of 200 homes, if every building was damaged in an earthquake, the deductible would equal $12 million. This minor repair would only cost about $2,000, but since this is less than the $60,000 deductible, the HOA’s earthquake policy would not cover the cost. Say, for instance, that after an earthquake strikes the only damage sustained was broken plumbing pipes in the unit’s floor. One damaged building from the Sample HOA has a replacement cost of $300,000, meaning it would always have a deductible of $60,000 (20% of $300,000) regardless of how much damage that building sustained. This means that coverage for each individual building is capped at the amount stated on the insurer’s property schedule. Earthquake insurance is written on a scheduled basis, not blanketed like a master policy or fire coverage. This is explained below in more detail.Īn earthquake insurance policy pays only if damage exceeds the deductible, and the deductible is based on the replacement cost of the damaged structure. For example, a stop-loss limit of $25 million on the Sample HOA means the insurer will only pay $25 million, and not the full $60 million regardless of how much damage occurs. Stop-loss limits are limitations to the total amount an insurer will pay for repairs, replacements, etc. By contrast, property/fire insurance premiums per year for a development are typically, at least to a certain extent, already included in many HOA’s annual assessments.Ī large problem with earthquake insurance premiums is that in order to keep the cost low (like described above), a homeowners association typically obtains a stop-loss limit. This is the amount an owner’s monthly assessment would increase if the Sample HOA voted to add earthquake coverage. Dividing $100,000 by 200 homes comes to about $500 per household per year, or roughly $42 per month. The earthquake coverage premium based on the Sample HOA’s replacement value would start at (and likely be even more than) $100,000 per year. Premiums are determined by the replacement value of all units in the development. The Sample HOA replacement value, for purposes of simplification, assumes there are no common area buildings. ![]() In order to examine the cost of earthquake insurance, let’s use a Sample HOA of 200 homes worth $300,000 each, a total of $60,000,000. The premium is determined by the replacement value of the collective units within a community association, and the deductible is the amount of money that an HOA must spend out-of-pocket on repairs or replacements before the insurance policy will pay. One of the biggest concerns for homeowners associations, especially of condominiums, is the cost of the premiums and size of the deductible for an earthquake policy. Providing earthquake for your HOA may be something your board of directors is considering in light of these risks. This risk continually increases each year that a major earthquake does not occur, exposing Bay Area community associations to a greater chance of earthquake-related catastrophe.Įarthquake Coverage for Homeowners Associations In 2008, the United States Geological Survey (USGS) predicted a 63% chance that a 6.7 or larger earthquake will hit the Bay Area within 30 years (6.7 is considered a major quake). Learn about the costs of insurance premiums, deductibles, and the types of homeowner earthquake policies available Earthquake risk keeps growing in California, making earthquake insurance a viable option for HOAs and condominium owners. ![]()
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