Michigan condo boards can no longer raise the master-policy deductible past $50,000
Michigan condo boards can no longer raise the master-policy deductible past $50,000
2026-09-12 · Michigan · Regulation
What happened. As of 1 July 2026, if a condominium master property insurance policy includes a per-unit deductible, that deductible may not exceed $50,000 per unit for the project's units to remain eligible for conventional financing. Fannie Mae and Freddie Mac imposed the cap in coordinated changes issued 18 March 2026.1
The old rule was a 5% per-unit maximum, and it has been retired in favour of the flat dollar cap. The general all-perils deductible cap of 5% of the dwelling coverage limit remains.
Why this closes a door Michigan boards have been using
Association master policy premiums have risen sharply, and the standard board response has been to absorb the increase by raising the deductible — particularly the wind and hail deductible. It is the one lever that does not require an assessment increase and does not require owner approval.
That lever is now capped for any project whose owners need to be able to sell to a financed buyer.
The other insurance changes in the same package
- Roofs may be insured at actual cash value. The requirement to insure roofs on a replacement-cost basis has been retired — the master policy must carry coverage on a replacement cost basis excluding roofs. Roofs must be insured, but not to replacement cost.
- Inflation guard retired in its entirety. Coverage sufficiency may now be evidenced by a guaranteed or extended replacement cost endorsement.
- Master policy coverage of at least 100% of estimated replacement cost value, with annual servicer verification from 1 January 2027.
- Unit-owner policies are required where a per-unit deductible exists, with the owner's own deductible capped at 5% of the coverage amount or $2,500.
The squeeze, described honestly
These changes were made to accommodate a hard insurance market — loosening replacement-cost and inflation-guard requirements is a concession to what carriers will actually write. But taken together they produce an uncomfortable position for a Michigan association:
- the deductible lever is capped at $50,000;
- roofs may be insured at actual cash value, which means depreciation comes off the claim; and
- the association must still carry 100% of estimated replacement cost value on everything else.
An association facing a large premium increase now has fewer places to put it than it had in 2025, and the place it can no longer put it is the one that did not require a vote.
The Michigan regulation that becomes load-bearing here
If roofs can be insured at actual cash value, then how ACV is calculated becomes the money question. And Michigan has a rule on that.
DIFS Bulletin 2024-26-INS, issued 8 November 2024 by Director Anita Fox — superseding Bulletin 2024-18-INS of 3 July 2024 — addresses the depreciation of nontangible items. DIFS states that some policies fold labour and other nontangible items into the definition of actual cash value; that ACV is ordinarily understood as loss of value from wear, tear, deterioration and obsolescence to physical or tangible items; and that labour is not a physical object and does not deteriorate or age. Under MCL 500.2236(5), a form may not contain inconsistent, ambiguous or misleading clauses that unreasonably or deceptively affect the risk purported to be assumed.2
On a Michigan roof loss settled at ACV, labour is a large share of the cost. Whether the carrier depreciates it can be the difference between a manageable shortfall and a special assessment.
A Michigan board's options this renewal
- Read the per-unit deductible on the current master policy. If it is above $50,000, units in the project are already outside the standard as of 1 July 2026.
- Ask the broker in writing what the premium looks like at a compliant deductible. That number is the real cost of the change and it belongs in the budget conversation, not the renewal conversation.
- Check whether roofs are now written at ACV, and if so, whether the policy's ACV definition depreciates labour. Bulletin 2024-26-INS is the citation to put in front of the carrier.
- Tell the owners about the HO-6 requirement. Where a per-unit deductible exists, unit owners need their own coverage, and an owner who discovers that at claim time discovers it in the worst way.
What Michigan's regulator has not done
Anything about this. A review of the complete DIFS bulletin index for 2024, 2025 and 2026 turns up nothing addressing condominium master policies, HOA insurance, per-unit deductibles or association property-insurance availability. The GSEs have imposed a $50,000 cap; Michigan's insurance regulator has not said whether that is achievable in this market. That gap is itself worth noting.
What to watch next
1 January 2027, when annual servicer verification of master-policy coverage begins. That is the point at which a project's insurance position stops being checked at origination and starts being checked every year.
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