Property owners far and wide have one very important thing in common when it comes to taking care of their home, or any other type of real estate they have on their name. Keeping everything in check and having it spotless at all times is preferable, but a far more important matter has to be dealt with. This is of course the insurance.
Insurance is there to give you immediate help in various ways and for a diverse set of unlucky scenarios. A home without insurance is not safe, and the people living inside cannot have peace of mind until they get it because they will always be worrying too much knowing there is no failsafe mechanism to protect their home from theft or damage. The same goes for condo association insurance.
The Condo Association insurance policy refers to the kind of insurance that generally covers property damage to the building and its immediate shared spaces and provides liability protection to the condominium association. Shared areas of such communities include crucial parts of the building such as the roof, all the exterior walls, stairways, and elevators, as well as outside property like the courtyards, swimming pools, and sidewalks on and around the premise.
This policy, which is also known as master policy, is paid for by a portion of the association dues. Therefore, with your association members paying for the insurance, you have to ensure their living spaces are adequately insured at all times. They should know exactly what their hard-earned money goes into and they will be asking you about it.
In this article you will learn exactly what you need to cover on your insurance checklist when it comes to protecting and insuring the condo association you are a part off. If you wish to learn more about this subject, do make sure to check out farmerbrown.com.
5 Top Tips about Condo Association Insurance
In this part of the article, you will learn exactly what you need to know. Here are five important coverages you simply have to include in your master insurance policy to avoid the financial or legal risks of underinsurance, as well as the dissatisfaction of your fellow tenants.
1. Property Coverage
Property coverage helps cover the cost of replacing your condominium building structure following damage from a covered peril. Did you know, for instance, that Risk Management Solutions (RMS for short) estimates that the insured loss to onshore properties from Hurricane Laura will range anywhere between $9 billion to $13 billion? The RMS also puts insured loss estimates from the wildfires in the west of the United States somewhere between $4 billion and $8 billion. These are enormous amounts of insurance money, which says a lot about how much damage can be caused seemingly out of the blue.
To avoid costly surprises following such a devastating loss, read your policy to know what it covers. Your master policy may come in two different ways, a walls-out policy and a walls-in policy.
a) Walls-out policy
With this policy, the insurance of your condo association will cover just the building structure, that is, everything behind and including your bare drywall and everything beneath your finished flooring materials. Crucial parts, systems, and mechanisms of the building without which life would not be possible, like wall painting, carpeting, cabinets, countertops, and plumbing fixtures are all excluded from coverage. This is often not enough of a policy for most associations as these truly are some of the most important essentials.
b) Walls-in policy
The master policy, in this case, will cover everything the walls-out policy covers but also include coverage of the important things that make the building livable including the paint, carpeting, plumbing, cabinets, sinks, and all the built-in appliances. However, the cost of replacing any upgrades or additions installed after the condo was built will fall on the unit owner since they are considered private investments.
2. General Liability Coverage
General liability coverage provides your Condo Association liability protection against claims of bodily injuries, property damage, personal injuries, or advertising injuries. For example, a person may sue your association after sustaining an injury due to slipping and falling in the pool area of your building complex. General liability coverage, in this instance, will help pay for the expensive legal costs and medical expenses that arise from such an accident. Things like this happen much more than you would expect unfortunately, meaning you definitely need such coverage.
Note: The standard general liability coverage limit starts at $1,000,000 per occurrence with the aggregate starting at $2,000,000.
3. Directors and Officers Liability Coverage
Elected board members of your Condo Association may be sued for actual or alleged wrongful acts while serving as board members of the body. Directors and officers (known as D&O) liability insurance helps cover the losses resulting from such lawsuits in case they take place, particularly the attorney fees that are always the largest part of the whole process. Consequently, protecting the personal assets of the board members might be required too.
4. Employee Dishonesty / Fidelity Bond Coverage
If a property manager or a board member steals your association’s business personal property, money, or securities, the coverage protects you from the losses caused by their misdoings. For adequate coverage, make sure to add the amount in both your reserve fund and the operating account.
5. Building Ordinance Coverage
The ordinances or laws regulating construction and repair of damaged buildings present when your building was first built may have changed over time. This is where building ordinance coverage comes in to help your case. The fifth and final crucial coverage deals with the increased costs associated with repairing or rebuilding up to the current building codes. For example, your new structure may be required by law to have upgraded HVAC and electrical systems, which will cost more than your previously installed outdated systems. For such situations, building ordinance coverage can be a lifesaver.
There are more than these five key factors to consider. Following is a list of other coverages worth considering for your Condo Association insurance include:
- Flood coverage
- Earthquake coverage
- Sewer back-up coverage
- Business income and extra expense coverages
- Extended replacement cost
- Inflation coverage