Individuals who wish to own a home but don’t want the responsibility of caring for property along with this home often choose to purchase a condo. Each condo owner bears the responsibility of insuring their residence, but insuring common areas shared by all residents falls on the condo association. The common areas include everything from shared walls between residences to amenities used by all condo owners.
What is a Condo Association Insurance Policy?
A condo association policy functions to protect common parts of a condo complex. Each policy lays out what it covers, but most policies share certain elements. They cover areas within the complex such as hallways, elevators, foyers, entryways, and stairwells. Outside features, such as the landscaping, fences, or walkways, fall under this policy, as do exterior building walls and interior walls shared by residences. Any structures designed for use by all residents, such as community pools and fitness centers, also fall under a condo master association policy. A good policy provides property and liability coverage for all areas not insured by individual condo owners. Those responsible for choosing a policy need to review the terms and conditions of each policy under consideration to get the best coverage. Garrity Insurance can help board members understand the options available to them.
Who Gets this Insurance?
A condo association board handles decisions for the entire community, including choosing vendors for common area maintenance and implementing safety and security measures. Each board member remains obligated to make their decisions based on what they believe will be best for the community while protecting the investment of each condo unit owner. The condo association insurance policy selected must work to achieve these goals.
What Type of Coverage is Available?
The condo association board must choose the level of property and liability protection. Certain policies offer protection for common areas when they are damaged by a range of perils, such as wind, vandalism, and fire. The liability portion of the policy covers the association in the event someone sues the association and helps with legal fees and any settlements that come from these claims. As mentioned above, the board must review the terms and conditions carefully to see what the policy includes and what it excludes.
Policy Offerings to Consider
When comparing policies, the board might find they can offer coverage for features inside individual units. For example, certain companies offer bare walls-in policies that provide nothing more than basic coverage. The walls, floors, and ceiling of each unit remain protected under this policy, and some companies include a unit’s electrical and plumbing systems in the policy. With this policy, the coverage might extend only to the actual walls and ceiling. They don’t cover any fees associated with painting these structures once any repairs have been completed.
A single entity policy or per original specifications policy extends this coverage to include standard build-outs found in units. Along with the floors, ceiling, walls, plumbing, and electrical systems, a single entity policy offers protection for any features that come standard across all units. This includes items such as cupboards, cabinets, and ceiling fans, along with many others.
A modified single entity policy takes this coverage further. It includes everything found in a single entity policy along with protection for upgrades each unit owner makes. For instance, if a condo owner upgrades their tile floor to marble, the policy covers these changes in the event of a legitimate claim.
Some companies offer all in per the docs or an all-inclusive policy that insures the entire building along with all common areas, mechanical systems, and the units in entirety. All in by endorsement policies, in contrast, states the master policy bears the responsibility of covering the building and all units in their entirety.
The condo association determines which level of coverage it wishes to provide after receiving input from the residents. The more coverage offered through the association, the less an individual unit owner needs to purchase. Board members have a fiduciary responsibility to choose a policy that represents the interests of the individual owners and the complex as a whole. For this reason, many condo boards choose to seek outside advice when making this critical choice.
If there are questions about what the policy covers and what it excludes, this information needs to be obtained by the board before purchasing a policy. Condo owners need to make certain they understand what the board has obtained. This allows each unit owner to get their own insurance to fill any gaps in the association policy and ensure they remain protected. Nobody wants to learn they lack the necessary coverage when disaster strikes, but sadly this happens more often than people realize.
Who Pays for This Insurance?
Condominium associations cover the premiums for their association policies. However, they pass this cost on to the individual owners in the form of association fees. Each year, the board conducts an annual assessment to determine how much the fees associated with running and maintaining the complex will be. They then divide this amount by the number of condo owners to ensure each owner pays an equal share of the premium and other expenses.
While a comprehensive policy costs more, each owner pays less in terms of personal coverage. Each condo owner needs to remember this when the fees come due. The owner either pays for the coverage personally or pays it as part of the association fees. Either way, this coverage needs to be obtained to ensure the condo owner remains protected against loss.
Condo associations need to work with a licensed insurance provider to determine the level of coverage they need for their property. Additionally, the board must determine if it should purchase additional coverage. This might include worker’s compensation, directors and officers coverage, hurricane or flood coverage, and more. In the event the complex sustains damage, this insurance becomes of great help in mitigating losses and restoring the property to its former condition. This becomes priceless, as these are homes and the occupants want to return to normalcy in the shortest time possible. The right coverage ensures they can.