Insuring your Condo: Get it Right

A condominium is a great option for a home. It may lack in your own personal lawn in the front, or a backyard, but the fact that you are sharing common resources with other condo owners is what makes it affordable.

In exactly the same way, Insurance for your condo is different from that of single-family home units. Insurance for a condo is typically made up of two components:

a. Insurance for the common areas or common resources: If you are living in a condo, the HSOA will most likely collect monthly dues from you and all other condo owners for its maintenance. A part of it is used to insure the common areas.

b. The individual condo’s insurance: As a condo owner, you are responsible for insuring different components within the four walls of your condo.

To understand in detail the various aspects of the insurance cover for condos under both components outlined in points ‘a’ and ‘b’, you will need to refer to the Condo Association Insurance booklet.

A copy of the condo association insurance guidelines, would have been given to you, at the time of buying the condo. This clearly outlines the responsibilities of the condo association, and you the condo owner. If you have not been provided with this booklet, please collect it immediately and go through the terms and conditions.

Why is it important?

In addition to anticipated damages and repairs, which are minor and are natural as your condo ages, the master policy also factors natural disasters like hurricanes, twisters, floods, and stormy winds. Depending on the extent of damage in the common areas, a corresponding amount will be deducted from each condo owner, which could be moderate or extremely high. Being unaware of such possible costs, may affect your financial outlay. The distribution of the costs depends on the number of condo units in the building, the fewer the condos, the higher the deductibles.

Again, insurance for the common areas are of two types and the HSOA’s master policy clearly indicates this:

· Bare walls in - This covers the exterior structure of your condo, but you are responsible for insuring both movable and immovable assets, inside your home such as appliances, personal belongings, fixtures and fittings, and so on. This is in case of any claim or damage arising at a later date.

· All in – this policy covers the exteriors and structural interior contents of the building (walls, floors, doors, windows, ceiling, cabinetry, countertops, carpeting, lighting etc) but will not cover your personal property.

So, what does the individual condo insurance cover?

The individual condo insurance is quite comprehensive and covers all those incidents or possibilities that can cause damage inside your home. These could be:

· Fire/Lightning/Windstorm

· Vandalism or Malicious Mischief

· Accidental Discharge of Water

· Burglary / Break in

· Accidental impact

· Water seepage damaging your walls

· Injury that comes from slipping on a wet kitchen or bathroom floor

· Liability protection for bodily injury or property damage to others

· Water backup coverage

So what are the items that would be a part of your personal insurance as a condo owner?

As a thumb-rule, these pertain to objects that can be moved or removed easily.

· Furniture

· Area rugs

· Electronic appliances

· Special items such as artwork, jewelry and furs that are expensive

· Rare and collectible items like autographed baseballs bats or balls

As a condo owner, it is important that you are aware of the different insurance coverages with reference to your condo and the common areas. Once you have all the information, you can then determine the extent of coverage you will need for your personal belongings.

Consult with a professional insurance company and they will be able to give you the right guidance, so that your condo receives adequate coverage.

Your HOA Insurance DOESN'T Cover Everything

Is your condo under-insured? Homeowner’s association (HOA) policy inclusions and exclusions have always been confusing. As a result, supplemental building coverage is sometimes omitted or inadequate- either intentionally to save money, or out of agent or client ignorance. In the past, HOAs required you to buy a unit owners policy (HO6) to cover the things the HOA policy didn’t, but no proof of insurance was required. In practice, both the decision to insure and to set limits on the coverage was left up to the unit owner.

Not anymore. New rules for condos and townhomes are now being enforced on all new federally insured loans and when refinancing existing loans. Every owner must now have a policy that includes “walls in” building coverage of at least 20% of the appraised value. This usually covers the interior walls, wall and floor treatments, cabinets and fixtures. Each association is different and the responsibility of the unit owner and the HOA is spelled out in the CCR’s and/or by laws.

Condo insurance isn’t just a law, it’s a good idea. If you’ve refurnished your condo with custom cabinets, crystal chandeliers, Berber carpets and marble countertops and it burns down, your HOA policy will compensate you for none of those upgrades. Not to mention your big screen TVs, leather sofas, antique china, jewelry and other expensive personal possessions.

If you own condos in Tahoe or Hawaii as investment properties and they burn down, your HOA policy will not cover your lost rents. It could take months to rebuild and without the rental income, you may not be able to cover the mortgage payments on your units.

Condo insurance is cheap- for $100,000 worth of coverage, you will pay around $300-$400 per year. Inadequate condo insurance is one of the most common errors we see when reviewing client policies written by competing agents. Don’t let this happen to you. Call Chris Falcon or Steve Fox at Allied Brokers to review your condo insurance or get a quote on a new policy.

Visit our website at http://www.alliedbrokers.com/ for information about all the types of insurance we offer. Or call 1-888-505-7988 for a free rate quote.