Condo Insurance

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Personal or Commercial Condominium Unit Coverage

When you first purchase your condo unit, the mortgage company will want to see proof of insurance on the building. They typically refer to this as hazard insurance. Since the association usually has a master policy on the building, all you will need is a certificate of insurance from the insurance company writing the master policy. The property manager can usually put you in touch with the company or agent. For the most part, that is all the mortgage company cares about. Any other coverages may be purchased at your discretion.

What is missing from the master policy?
 

1) Contents:

First, the master policy does not cover the contents owned by the unit owner. You can buy that from our agency if you choose.

2) Part of the building:

Second, the master policy does not cover damage to the portion of the building which the bylaws say you must maintain. Unfortunately, we can't give you a more detailed explanation than that without actually reading the association bylaws. You see, every condo association lists in the bylaws which portion the association must insure, and which portion the unit owner must insure. For example, some associations say that the association will insure everything which is attached to the building. This is sometimes known as "all in" coverage. Other associations say that the association will insure only the portion of the building from the bare walls outward. This is sometimes referred to as "bare walls" coverage. In a bare walls association, the unit owner is responsible for purchasing insurance on wall coverings, floor coverings, cabinets, plumbing fixtures, electrical fixtures, and any improvements added by the unit owner. This can add up to a lot of money. Other condo associations use coverage descriptions that are a mix of the bare walls and all in concepts. Without reading the bylaws of the association, we typically recommend at least $20,000 building coverage for the portion which you must insure. You may have much less! Check your policy, and call us if you have any questions! By reading the bylaws, and getting a description of the interior fixtures in the unit, we may be able to offer a more exact estimate of your need. In any case, you are responsible for determining your coverage needs. If you have a claim, we want you to have adequate coverage! Increasing building coverage is not expensive.

3) Loss assessment:

Third, the master policy does not offer coverage if the association performs an assessment against individual unit owners. From time to time, the association may have a claim for damages for which it is not properly insured. For example, there may be a claim for $1,000,000 in damages, when the association only has $900,000 coverage. To cover such a shortfall, the association would take an assessment against each of the members proportionately. For a big claim, this can mean serious dollars to each unit owner. Loss assessment is available to cover such claims provided the damage was caused by a type of loss which the unit owner's policy covers. Claims of this sort are more likely in associations that do not have a professional management company, but can happen even with a management company. Adding loss assessment coverage is cheap. Most companies only offer a limited amount of coverage, such as $50,000.

4) Liability:

The master policy should include liability to protect the association from suits arising out of bodily injury and property damage. Unit owners should purchase their own liability insurance to protect them. For owner occupied residential units, this is typically done through the purchase of a condo owners policy. For commercial units, we would usually offer a commercial general liability policy.

A word about deductibles:

All master policies have a deductible. The amount varies from one condo to another. Some are as low as $250, and some may run $25,000 or more. $1,000 is a rather common deductible. Higher deductibles tend to show up in associations that have had frequent claim problems. Even if you purchase loss assessment coverage as described above, it never covers for an assessment to pay a deductible under the master policy.

Should you serve on the board of directors?

At some point, you may have the opportunity to serve on the board of directors of your association. The good side to doing so is that it gives you some control over how your affairs are run. The down side is that serving on the board could make you a target of litigation. Before accepting a position on the board, we recommend verifying that insurance can protect you from suits for your actions as a board member. If the board is unpaid, your homeowners policy (if you have one) may provide liability coverage. Since the homeowners policy excludes liability arising out of business pursuits, it will not cover if you are paid to serve on the board. We strongly recommend that you verify that the association carries directors and officers liability insurance. This protects the members of the board if they are sued as a result of their actions. There are exclusions in all such policies, and you should make sure that you understand them. Our agency can provide all insurance coverages typically requested by condo associations.

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Do you have questions about Condo Insurance?

Contact an insurance agent at Brown's Insurance Agency, Inc. today to answer any questions about Condo Insurance or for a free review and insurance quote for Condo Insurance. And don't forget, as an independent insurance agency, we represent several top rated insurance companies. We have the flexibility to help you find coverage at competitive premiums for business, home, auto, and more.