Condominiums contain shared spaces that are overseen by a homeowners’ association. An HOA is responsible for the insurance of the complex’s communal areas.
It is also responsible for some of the maintenance for the building’s infrastructure. Condo unit owners are responsible for key factors of maintenance and for the upkeep of their units. Additionally, unit owners are free to modify and upgrade most elements of their homes, such as fixtures, floors and countertops.
This means a condo unit owner has a combination of responsibilities and freedoms. In turn, this creates a complex insurance situation. Typically, different aspects of a condo unit are covered by different insurance policies.
Certain aspects of the condo unit are covered by the property insurance of the owner whereas others are covered by your personal condo owner’s insurance. Both types of insurance are necessary for coverage and it is important to select the best insurance possible as a condo owner.
Find out more about insurance for condominiums in the following informative guidelines.
Learn About Complex Master Policies
Similar to the policies held by landlords and apartment building owners, condominium complexes carry master insurance policies. These are typically paid for by the fees condo unit owners pay their homeowners’ association.
A master policy covers damage caused to the shared areas of the condo complex as well as liability coverage for injuries that occur in those communal areas. These shared spaces include areas such as the complex’s grounds, the swimming pool, the fitness rooms, the elevators, the hallways and the stairwells. Usually, master policies cover some or all of the complex’s structural aspects, such as the building’s exterior walls and roofs.
The coverage provided by a master policy typically includes fire damage, weather damage and theft. It does not usually extend to floods and catastrophes. Unlike landlord’s insurance, condo master policies might not provide cover for functional damage caused to wiring, pipes and other utilities in the walls of a condo unit.
Like all insurance policies, master policies are subject to caps, limits and maximum payout amounts. It is possible that in the event of an emergency, the maximum payout is not enough to cover all the costs to repair the damage.
If this occurs, condo unit owners must pay the difference through their personal insurance policies or out of their own pockets. This proves detrimental if you have a limited policy or if you are financially incapable of covering the cost of repairs on your own.
Master policies vary greatly, so do not make assumptions about what is and is not included in your condo complex’s policy. You have the right to view HOA insurance policies and complex’s master policies though, so make sure you do so before you start searching for your own personal insurance policy.
Get the policies checked by an insurance professional to determine what further insurance coverage you must get. Being diligent about your coverage allows you to avoid potential issues in the future.
Learn About Additional Insurance Needs for Condominium Unit Owners
Owners of condominium units are generally accountable for the maintenance of some of their units’ functional elements. They are responsible for insuring those elements too. You may be expected to insure against damage to exterior frames, fixtures inside your unit and any areas directly attached to your unit, such as patios or gardens.
Therefore, if a storm causes major damage to your condo unit, the master insurance policy might cover some of costs. This includes coverage for things such as the restoration of an exterior wall, but your personal insurance compensates for damaged fixtures inside your unit. These include items such as kitchen components and bathroom flooring.
Both master insurance policies and standard personal insurance policies for condo units typically exclude specific events from the coverage provided. Exclusions generally include:
- Tornadoes and hurricanes.
- Pest infestations
- Dangers from nuclear events.
- Losses due to intentional damage by the policyholder.
- Losses due to the negligence of the policyholder.
- Sewage backups and other underground water problems.
- Usual effects of aging on possessions or property.
How at risk you are depends on where you live, the construction of the building, your personal assets and other factors. Consider your own situation before getting personal supplemental insurance. For example, if your condo is located in an area with a higher than average flood risk, you get specific flood coverage.
If the HOA of a condo complex determines a condo unit owner is directly responsible for the damage caused to a communal area, the HOA can refuse to submit an insurance claim. Instead, the condo unit owner must pay for the costs themselves.
The same applies in the event an individual condo unit owner causes injury to another unit owner. You can buy private loss-assessment insurance to have coverage against such scenarios. If you do not purchase this type of insurance, you are left with steep repair costs.
If you modify or upgrade your condo unit, you are not necessarily covered under the complex’s insurance policy. This is because some insurance policies only cover condo units as they are in their standard form. If this situation applies to you, it is worth obtaining additional private insurance.
The complex’s insurance policy has a deductible. This must be paid for by condo unit owners before your insurer pays out funds. If only one condo unit is damaged, the total deductible might apply.
If lots of units are damaged, the deductible is commonly spread across all damaged condo units. If a storm affects 100 of a condo complex’s 200 units and the complex has a deductible of $5,000, each affected condo unit owner would have to pay $500 before the coverage kicks in.
If all 200 units were affected, each condo unit owner may have to pay only $250 before insurance funds are paid. To protect yourself against variability, buy additional private insurance coverage. This allows you to have peace of mind, as you know the remaining balance is covered regardless of how much the complex puts toward the repairs.