Five key questions: Understanding condo insurance
- What does the master policy cover? The building structures, outside property, and the common areas are generally covered by insurance through your homeowners association. There are two broad categories of master policies: ‘bare walls in’ covers real property from the framing inward, but not fixtures and installations, while ‘all-in’ covers fixtures, installations and additions. But there are many variations of these two types, so be sure to review your master policy with your insurance agent to understand coverage and limits.
- What is the deductible on the master policy? If there is a major loss to the structure or common areas, the homeowners association insurance will cover the loss, less the deductible. In most cases, the association would pay the deductible by assessing individual homeowners. In some cases, the homeowners association specifies the amount the individual unit owner should carry on the HO-6.
- Do you need loss assessment coverage? There are times when claims exceed the coverage carried by the homeowners association. Major weather damage, fire, and serious injury to a visitor, are examples of claims that can exceed the insurance limits and individual unit owners can be assessed.
- How much coverage to get? The analysis of the master policy will help determine how much coverage is needed for structural items. You’ll then want to do an inventory of the contents-furnishings, electronics, valuable items, and so on. For both structural items and contents, replacement cost coverage is best since it does not deduct for depreciation and pays the cost to replace the loss. Other considerations are the amount of liability coverage and living elsewhere if your unit is uninhabitable.
- What about flood coverage? Even if your association has flood insurance, if your personal contents are damaged by flood, you probably aren’t covered.
In addition to homeowners policies for individual condo owners, we also provide master policies for condominium associations.
For more information, contact Renee Pike.