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A discussion about reserve funds and increased insurance coverage

Ah, but you have an insurance policy for just this sort of thing. At this point, if you have the endorsement on your insurance policy, it may cover you for this special assessment, depending on the deductible on your policy. If you have a $1,000 deductible, you’ll be out of pocket.

We can easily imagine that this insurance coverage can help you in some situations, particularly if the special assessment is far higher or your deductible is lower. But many special assessments have nothing to do with insurance losses and claims.

Associations may decide to replace the roof, hallway carpet or windows because they’re old. They may want to improve common areas, install or upgrade a workout room, redecorate lobbies, or do many other improvements and repairs simply because things break or wear out, and no one wants to buy a home if the property looks worn down and out of date.

If an association has substantial reserves, it may elect to pay those expenses out of the reserves. But, when an association has little or no reserves, the association has two choices: It can finance whatever repairs or improvements are needed or go ask the owners to pay for the repairs in a lump sum.

Either way, the owners will have to come up with the money to fund those improvements or repairs.

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