Know anything about condo insurance?
March 27, 2010 by
Filed under condo insurance
My wife and I have been condo owners for two years and have had homeowners insurance the whole time. Our expiration period is coming up soon and need to renew, but we’re not sure what coverage we have to have versus what our condo board already provides. Can anyone help?
Yes I could ask the board, but then how would you earn Answers! points?
It really depends, and I know this is a cop-out, but you’d be best off to ask the board. The reasoning behind this is because each condominium association has the right to choose whether they’re only going to insure the exterior of the structure (everything outside the interior walls) or the entire structure (meaning that the interior of your unit would be covered under their policy).
Now, you’ll definitely need your own condo-unitowners policy in order to cover you for liability and protect your belongings, but you may not need to purchase any dwelling/structure coverage.
If your association’s insurance policy covers the entire building, including the interior of your home, you don’t need any dwelling/structure coverage. If your association only covers the exterior, then you need enough dwelling/structure coverage to be able to replace everything from the walls in. This would include your flooring, cabinets, plumbing, attached appliances, etc.
Now everything I just told you pertains to the state of my licensing and residence, which is Arizona. Different states may vary slightly, but I think most operate this way for the most part.
Read the Master Insurance Policy of the Condo Association. You are entitled to a copy of it. It has been my experience that each condo owner is responsible for everything inside the walls of the unit. That means that your individual policy covers your belongings as well as your heating unit, AC, plumbing, electric, cable, etc. The Master Policy covers the roof, common areas, etc. And the Master Policy usually will cover your unit IF there is a total loss of the building. In that case, the Master Policy will only rebuild to the original specs. Read the Master Insurance Policy to be sure.
Your condo association purchases insurance on the building and premises. Broadly speaking there are two approaches condo bylaws take to insure the property.
One approach is the condo association agrees to cover only the exterior and common areas. You are responsible to insure the interior this can include walls, wall coverings, flooring, furnace, appliances, lighting, plumbing fixtures, kitchen and bath cabinets (basically everything inside your condo). In this scenario you are responsible not only for your personal property but also the entire interior of your condo. As an insurance agent I did not like this approach because it is very difficult to determine how much insurance you should have to be able to repair or replace everything in within the walls of your condo.
The other approach, which I always preferred, was more comprehensive where the association agrees to cover the entire unit as it was originally built. In this scenario you only insure your upgrades (i.e. bookcases, upgrades, finished basements. etc.) and your personal property.
You need to carefully review your condo bylaws or have a good insurance agent go over the bylaws with you. If you don’t insure the property that you are responsible for you could find yourself woefully under insured and perhaps unable to rebuild your condo.
In addition to insuring the part of the building you are responsible for you need to determine the replacement cost of your personal property within the condo.
Sorry for the long answer but it is a surprisingly complex question.