Are you the owner, or soon to be owner, of a condominium, townhouse, coop, or unit in some type of homeowners association? Condominium Unit Owners Insurance protects your interest in the property you own or for which you have responsibility. The association will typically have a Master Insurance Policy, which provides coverage for the common property and shared liability of the entire association, but a condo policy protects your specific interest within the association.
When you buy a unit in an association, you will typically receive from the board of directors a copy of the association documents, declaration, and by-laws. These records dictate the boundaries between common space and private owned property, as well as the restrictions, conditions, regulations, and covenants to which each condo unit owner must adhere. The ‘bylaws’ will include a description of your responsibilities such as maintenance fees, voting procedures, use of common area, and insurance requirements. The bylaws will be important for you to review with your insurance agent and attorney, since this document will spell out whether you should insure only your contents within the unit, or additionally the fixtures, improvements and betterments, carpeting, tiles, hardwood floor, walls, wallpaper, studs, etc.
Depending on your bylaws, you may simply be responsible for your furniture, clothing and personal items, or also the appliances and inner shell of your unit. Not all condo policies provide the same type of coverage. This is why it is extremely important that you work with an insurance agent who is familiar with the nuances and verbiage of the above mentioned legal documents to be sure that your policy is adequately constructed, and your valuable real estate investment is properly insured.
A condo insurance policy will typically provide coverage for loss or damage to your contents and interest in the building as a result of:
Many policies will cover personal property loss or damage worldwide, meaning personal items are not only covered in your unit, but also while in your vehicle, when you are traveling or moving from one home to another. A condo policy can provide coverage for your contents, including clothing, furniture, cookware, and appliances. Valuable or rare items, however, should be specifically listed on your policy to ensure these items are covered for the correct value. Otherwise, the policy with have a limit of coverage for items such as money, precious metals and stones, jewelry, watches, pairs and sets, antiques, artwork, watercraft, trailers, furs, firearms, media, business property, cameras, computers, and other types of property depending on the policy terms and conditions. Insurance companies will require such “scheduled” items to be reported with a proof of purchase or professional appraisal. If an invoice for such items is not available, insurance companies typically require an updated appraisal every three years.
A condo policy also provides coverage for your personal liability if you are sued for negligence resulting in property damage or bodily injury to someone else. You could be held legally and financially liable if someone is hurt or suffers a loss in or around your unit. Personal liability may be your largest financial exposure. If someone sues you, can you afford the legal expenses, including defense costs, attorney’s fees, court charges, and damages? Your personal outlay could amount to tens or hundreds of thousands of dollars. If you are held liable, and can’t afford to pay the expenses or damages, many state or federal courts will force you to pay with future unearned income. You should carefully review your policy with your agent to ensure that you have adequate coverage.
A condo policy may or may not include coverage for ‘loss assessment’. Loss assessment occurs when a property or liability claim is made against the entire condo association, but the Master Policy does not have enough insurance to cover the claim. In such a scenario, an association may have the legal right to assess each unit owner his or her proportionate share of the excess damages. In such cases, unit owners may incur a hefty financial burden, especially if that owner’s condo policy does not provide coverage for ‘loss assessment’. For instance, visitors, bystanders, or trespassers might be injured while on or around the common area of an association, leading to bodily injuries costing hundreds of thousands, or even millions of dollars in medical costs, lost wages, punitive and compensatory damages, legal fees and court costs. Catastrophic damage can occur to the commonly owned property or building. In either scenario, if the damages amount to more than the coverage limits within the Master Policy, you could be assessed for the difference. You should review this issue with your association’s board of directors, insurance agent and attorney to determine if the Master Policy provides adequate coverage or allows for such assessments. In any event, it is very likely that you may need loss assessment coverage.
Condo policies should be carefully constructed to coordinate with your specific needs and those requirements dictated by your association. You may also have insurance requirements dictated by your lender if you have a loan or mortgage. Boynton Insurance Agency has condo insurance specialists who can help advise how to best construct a condo policy for you, and help you find the most adequate and affordable solution for your insurance needs.