Facade of condo units

The Ins and Outs of Condo Insurance

February 6, 2017

Do you own or are you buying a condo? Understanding what your insurance needs are for your new condo can be tricky, but knowing the right questions to ask will help you make an informed insurance-buying decision.

As a unit owner you will be responsible for your own personal property in the unit – clothing, furniture, kitchenware, etc. There’s also a good chance you’ll be responsible for insuring part of the building or structure of your unit. Exactly what is your responsibility is determined by the Condo Association By-Laws.

With most condos, the by-laws will explain that the Associations master insurance policy will pay for liability and property damage losses to the common areas of the building. So in the event of a devastating fire to the building, the master policy will pay to repair/rebuild the common areas, often including the building envelope.

But what about the fire damage to the individual unit? Well written by laws will further explain who is responsible for in-unit damage to specific areas. For example, unit owners should understand if the windows, doors, or fixtures, are their responsibility or the associations. What about the drywall, common walls, wiring, utility lines, deck and so forth? If the by-laws indicate that the individual owner is responsible for these in-unit items, it’s critical that your personal condo policy include a sufficient limit of building coverage to cover these items in the event of a significant loss.

Who’s responsible for the improvements or upgrades a condo owner makes to the unit? Often the by-laws will explain that in the event of a loss the master policy will pay to rebuild the unit as specified in the original blue-prints. If the original plans called for Formica countertops and linoleum floors but you, or a previous owner, installed granite and hardwood floors, you will need to include building coverage in your personal condo policy to cover these costs.

The answers to all of these questions can vary from one condo association to the next, so do not rely on past experience or suggestions from friends or family. It is important to understand what the association’s master policy covers compared to your individual unit policy as there is both opportunity for overlapping coverage and significant gaps which can be avoided through working with your agent.

It is never too late to contact your agent and review/update your insurance or to confirm that you have exactly the coverage you need.

Items to consider:

Loss Assessment Coverage:
If the association experiences a loss that exceeds the master policy’s limits, requiring the association to issue a special assessment to unit owners to pay the shortage, the unit owner can protect themselves by purchasing “Loss Assessment Coverage” under their policy that will respond to this type of loss scenario.

Documenting the interior and the contents of the condo unit through a video and/or photographs can help expedite recovery following a covered loss. Store the videos or photos digitally in the cloud or securely offsite.

Replacement Cost Coverage:
When possible, choose replacement cost coverage, not actual cash value. If you have replacement cost coverage, the insurance company will pay what it costs to repair or replace your damaged possessions at today’s prices without deducting for depreciation. While actual cash value is standard, most insurance companies offer replacement cost as an upgrade. This should be done for both the structure and contents.

Special Coverage Options:
Consider water/sewer back-up, flood, hurricane, umbrella and scheduling items such as jewelry or fine-art. It is important to have a well-rounded policy that protects all your interests. If you’re considering, or presently are, sitting on the Board of Directors’ for your condo association, make sure you talk to your agent about the particular insurance issues included with this commitment. Your personal insurance agent can review these coverages with you and put together the program that best meets your insurance needs.

Robertson Ryan & Associates offers modern insurance for both condominium associations and condo unit-owners. If you are renting an apartment, condo or home, we have insurance programs available for renters as well. Message Us