Tackling Condo Insurance

Posted on July 21, 2020

Owning a condominium unit is a unique challenge as it merges at least two entities sharing in the risk associated with one property. Similar to other properties, condo owners need insurance to protect themselves against damage to the property as well as the associated liability risks. Because the condo association and the unit owner both have a risk, there are two different types of policies to consider: a master policy and individual condo insurance (HO-6).

CONDO ASSOCIATION VERSUS UNIT-OWNER RESPONSIBILITIES 

Most condominiums are run by a condo association based on the condo by-laws. The language used in the condo by-laws is very significant when doing an insurance review as they will define which portions of the building are the responsibility of the association and which are the responsibility of the unit-owner.  

There are two common ways the language will define responsibility. It is vital to determine where the by-laws define the boundary between the association and unit-owner’s responsibility.

  1. “ALL-IN”

    This language indicates the association is responsible for all of the unit as a part of the building. This does not mean the association is responsible for everything. It may exclude any improvements made after the association was originally established.

  2. “STUDS-IN”

    This language increases the responsibility of the unit owner. It would mean the association would rebuild the shell of the unit, but the unit-owner would need to replace the walls, floors, ceilings, appliances, cabinets, and other fixtures.

It is important to note there are various approaches in-between these two common types. For example, the by-laws may indicate the association would put up the walls but not cover paint or wallpaper. Or, they may construct the walls, floor, and ceiling but not appliances and cabinets.

CONDO ASSOCIATION INSURANCE 

A master condo policy would cover the building, property owned by the association, and liability arising out of use of the premises.

The association policy will typically cover at least the following property:

  • THE WALLS OF THE ENTIRE BUILDING

  • THE BUILDING’S ROOF

  • COMMON AREAS

  • ANY OTHER AREA OUTSIDE OF THE UNIT AS DEFINED IN THE BY-LAWS AS MENTIONED ABOVE

  • ANY PROPERTY OWNED BY THE ASSOCIATION SUCH AS CLEANING AND MAINTENANCE SUPPLIES, FURNITURE, OR OTHER EQUIPMENT

The master policy would also cover liability for the association such as a bodily injury claim for an injury in a common area.

The coverage would not apply to:

  • THE UNIT ITSELF AS DEFINED IN THE BY-LAWS

  • ANY PROPERTY OWNED BY THE UNIT-OWNER

  • BODILY INJURY OR PROPERTY DAMAGE LIABILITY FOR THE UNIT-OWNER

Additionally, any association should purchase a Directors and Officers policy to protect against complaints arising from their duties such as fiduciary responsibility, failure to maintain the building or common areas, discrimination, financial mismanagement, and other such events.

Individual Condo Policies 

Even with a master policy on the building, the unit-owner still needs insurance to protect everything inside the unit. A personal condo policy, also known as a HO-6, is designed to provide protection for:  

  • DAMAGE TO THE UNIT

  • DAMAGE TO PERSONAL PROPERTY (FURNITURE, SMALL APPLIANCES, CLOTHING, ELECTRONICS, ETC.) 

  • TEMPORARY RELOCATION DUE TO A COVERED LOSS

  • DAMAGE TO OTHER UNITS CAUSED BY THE UNIT-OWNER

  • BODILY INJURY WITHIN THE UNIT AS WELL AS CAUSED BY THE UNIT-OWNER ANYWHERE IN THE WORLD

There are a number of additional coverages which may be included in the personal condo policy such as Loss Assessment, Replacement Cost on Your Contents, Special Personal Property Coverage, Water Backup, Identity Theft, Cyber Insurance, and many more.

RENTED CONDO UNITS

The unit-owner as well as the association should have an additional concern if the unit is rented to someone else. Requiring the tenant to obtain a renters policy can help eliminate some of that concern.  That policy covers the tenant’s personal property as well as their liability, reducing the risk of a claim against the unit-owner’s policy or the master policy.

It is extremely important the unit-owner add “Unit Rented to Others” coverage to their HO-6 if they are renting the unit out. This eliminates some of the exclusions on the policy related to renting the property.  While there is a small premium charge for this coverage, it is vital to ensure the proper protection on a rented unit. 

GET THE CONDO COVERAGE YOU NEED 

If you’d like to discuss your needs for a personal condo insurance policy, a master condo policy, or a renter’s policy, you can turn to the trusted, experienced insurance professionals at Aronson Insurance.  To learn more about the condo coverage we can provide for you, call us today at 781-444-3050. 

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