What Condo Insurance Can Do

By Catherine Powell

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If you own a condo you most likely have condo insurance.  Many people think that condo insurance and homeowner’s insurance are one and the same.  This couldn’t be further from the truth.  While both insure the structure and contents of a home, there are a number of differences between the two.  The good news is condo owners for the most part pay less for their insurance than do homeowners, for the simple reason that condos are partially owned by the owner and partially by the condo association.  However, to properly insure a condo and protect the property that condominium owners do possess, it’s important that you understand what condo insurance can and can’t do.

What’s the big deal about bylaws?

When you own a house, you’re responsible for everything from the structure to the ground upon which the house sits, along with everything contained therein.  This means if the roof leaks, it’s up to you to repair or replace it, unless the leak was caused by wind or windblown debris.  With a condo, this usually isn’t the case, since the roof is community property listed in the condo association bylaws as “common areas”.  It’s important that condo owners read the bylaws to understand what they are responsible for insuring and what common areas are the responsibility of the association to protect and repair. 

The reason the bylaws are crucial becomes obvious when you realize that since your unit is connected to others on the property, what happens to one could easily involve another.  For instance, let’s say a pipe bursts in the unit above or adjacent to yours and the water damages your unit.  Who’s responsible for paying to repair the damage?  Or, what if a fire breaks out in a neighboring unit and smoke damages yours.  Who is going to replace your ruined furnishings? If the roof of your condo is damaged by flying debris that leads to water damage in your condo, who’s responsible for repairing the damage and replacing your ruined belongings? These questions can only be answered by reading the bylaws to see what the association’s master policy covers, since this differs from one condo association to the next. 

What are the limits specified on the master policy?

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Just as with any insurance policy, your association master policy has its limits.  Once those limits are reached, the association will generally issue what is known as a “special assessment” that will require the condo owners to pay the difference.  If you don’t want to be caught in a situation where you are forced to reach into your pocket to make up the difference any time a special assessment is levied by your association, there is an alternative.  You can purchase Loss Assessment Coverage on your own condo insurance policy that will kick in any time your association asks you to fork over more money to cover a special assessment.  Another way to make up for any shortfalls on the master policy is to secure an umbrella policy under your condo policy.  (To determine the best way to protect your property, you should talk to your insurance agent.)

  

What other special circumstances should you consider?

Just as with a homeowner’s policy, there are exigencies that are not covered under a typical condo policy.  These include such things as flood or hurricane damage, water or sewer backups, and personal property losses over and above the stated limit on your policy.  This means if you have expensive jewelry, pricey collectibles, or valuable works of art, you need to assess their worth before securing additional coverage for these items. 

Replacement or Cash Value?

Here’s another thing you need to note on your condo policy: Replacement Value or Cash Value? If your policy states replacement cost coverage, this means should your possessions be destroyed or stolen, you will be compensated sufficiently to purchase a replacement for the items lost.  If your policy states “Cash Value”, this means your insurance company will determine the value before issuing you a check which may or may not be sufficient to purchase a replacement for the lost item.  Cash Value varies depending on the age and condition of the item.  Since Cash Value is the default for most condo policies, you should talk to your agent about what it would cost to upgrade your policy to Replacement Value.

Other Considerations

Another reason to read your condo association bylaws is to determine what else is and isn’t covered under the association master policy.  Below are some things to consider:

      1.      Who pays if you damage a neighboring property?  This is extremely important to know since if a fire or leak occurs in your unit, it’s likely to damage a neighboring one.

      2.      Does the master policy cover interior structures such as cabinets, flooring and counter-tops? 

      3.      Is your personal property (belongings, appliances & furnishings) covered by the master policy if damaged in a common peril?

      4.      Who covers your temporary housing expenses if your unit is damaged to the point where you are forced to vacate the premises?

      5.      Does the master policy cover your liability should a guest of yours get injured while on the property?  (Does it include coverage for your guest’s medical expenses or only legal expenses?)   If you would like to get a free instant competitive liability quote click here.

      6.      What does your association consider as common areas?  If you have a patio, balcony or garage, they may or may not be covered under the master policy.

The bottom line is if you want to make sure you’re protected in the event something happens to your condo, you need to understand what your association master policy can do.

Catherine Powell is the owner of A Plus All Florida, Insurance in Orange Park, Florida.  To find out more about saving money on your condo or homeowner's insurance, check out her website at http://homeownersinsuranceorangeparkfl.com/