Condo Association Rules: Insurance Policy

Living in a condominium can be a lot of fun. You don’t have to shovel your driveway, mow your lawn, or chase small furry creatures out of your basement. Unfortunately, condos aren’t exempt from storms and other disasters. Like a home, it is important to keep them properly insured against the many types of possible damages. Home owner insurance and condo insurance have many similarities–and some important differences.

Home owners usually think of insuring the structure or frame of their house against something like fire, with contents of the house taking a secondary importance. It is usually best to take the opposite approach with condos. The key is determining what you are responsible for. Rules will differ with each complex, so make sure to find out exactly what your complex’s stipulations are.

Shared Area Insurance and Association Deductible

The owner of the condo is responsible for their own condo, however they are also considered partially responsible for shared areas. The owner of the complex may withdraw a certain amount from each resident to help cover these shared areas. This does not mean your condo is covered. This may only cover those shared areas and despite having to pay this fee. Make sure to do your homework before you enter a contract with a complex. Find out exactly how much you are paying to cover your portion of the common areas.

The association deductible is applicable in case of severe damage. At this point the association deductible is spread between the tenants. It is possible that this could be several thousand dollars. Make sure you are clear on what the association deductible is before you sign up.

Two Common Types of Master Policy

“Bare walls-in” coverage covers real property starting with the exterior framing and working inward. It does not cover fixtures, installations, and appliances. The actual structure of the building will be covered, but kitchen fixtures like granite countertops or bathroom fixtures like marble sinks will not be covered. If this is the case, you will need more coverage.

Someone who has an “all-in” policy covers all fixtures, installations or additions within the individual units. If you have this master policy you will not need as much coverage as someone with a bare walls-in policy.

Cash Value Coverage vs. Replacement Cost Coverage

Cash value coverage is based on the current cost to replace minus depreciation. If a refrigerator is 5 years old, the amount you will receive is based on the current cost of a fridge minus 5 years of depreciation. By contrast, a person with replacement-cost coverage would receive a check for what it would cost to replace the old TV with a new model. Depreciation is not used in the replacement-cost model.

Other Things to Consider

There is a difference between flood insurance and water backup insurance. Water backup insurance you in the case of that nasty business when a sewer or drain gets backed up. This is especially important if you have a basement or lower level floor space in which you are storing belongings. Windstorm and other types of insurance are also available through state and federal government channels.

Ask Your Insurance Agent

What is covered under your condo insurance policy? Are you familiar with your Master Policy? Do you need to cover some of your structure? Are all your valuable interior contents covered? Does your Condo Association need to find new insurance? Ask H&K Insurance Agency’s very own Brendon Kilcoyne, specializes in providing risk management for condominium associations and apartment complexes; writing magazine articles and hosting various seminars for both condominium associations and apartment complexes.