It protects the unit owners as well as the association and consists of liability and property coverage.
What Does This Policy Cover?
Condo owners must know what is covered by the master insurance policy and what they must obtain separate coverage for. The master policy ensures the condo association cannot be held liable if a person or their property is damaged in the common areas of the association or at the building's exterior.
However, the association may choose to purchase additional coverage, so each unit owner should ask to see condo master insurance plans to learn what is available. The HOA master policy insures the common areas, the condo structure, and the grounds around the structure.
The Structure of the Condo
When covering the condo structure, the association may choose bare walls-in coverage, single entity coverage, and all-in coverage. Each has its benefits and drawbacks.
Bare walls-in coverage, often referred to as studs-out coverage, protects the physical structure itself. This includes the exterior, framing, roofing, drywall, insulation, piping, and more. Consider the materials needed to build and uphold the units. That is what this policy covers.
People often assume bare-walls coverage is comprehensive. However, it is actually the most basic plan. It covers nothing within each individual unit, only those items that are used by all residents. Each condo owner must purchase additional coverage to protect the contents of their unit.
Single-entity coverage includes everything covered in a bare walls-in policy and more. For example, it covers those items that were included when the unit was built. When a condo owner chooses to make upgrades or improvements, the master insurance policy will not cover these renovations.
All-in coverage is the most comprehensive. It covers all items protected by a bare walls-in or single-entity policy and more. This type of policy covers each unit's structural elements and fixtures. If a homeowner chooses to upgrade or improve their unit, they are protected under this type of policy, which means they need less personal coverage.
Coverage Included in All Condominium Association Insurance Policies All master insurance policies cover the grounds and will pay for any expenses related to an injury or damage that occurs on these shared grounds. This may include playgrounds, walking trails, sidewalks, parking lots, and more.
Common areas are insured under this type of policy. Any pools, fitness centers, clubhouses, and other amenities open to all residents are covered unless the association chooses to have the policy written otherwise.
Condo owners must understand the differences between limited and general common areas. Limited common areas are available only to certain residents, such as those that exist in a specific building. For example, certain condo owners may have access to a staircase within their building that other residents of the development don't use. This is a limited common area.
General common areas include all shared spaces. This may be a basement, an elevator, or another amenity that any resident of the association may use.
Every policy comes with a deductible that helps keep the cost of repairs down. Condo unit owners typically share the expense when a deductible must be paid. The association also has liability insurance to ensure the condo owners won't be responsible if a person is injured in a common area.
However, condo owners need their own personal liability insurance to protect themselves if someone is injured while in their unit. Regardless of the type of insurance, condo owners must know of any policy limits. If the association lacks the necessary amount of insurance, the condo owners could be responsible for any remaining balance once the association's policy pays up to this limit.
In addition, insurance companies limit what they will pay out. For instance, fire, vandalism, and legal fees for liability claims are typically covered. Unit owners and condo associations must know of any exclusions to covered perils.
Earthquakes and floods generally aren't covered by a condo association policy. The association must purchase separate coverage for these perils. If it doesn't, the unit owners may not be protected.
In addition, unit owners must know the covered loss limits. If a fire breaks out and causes $1.8 million in damage, but the master policy has a covered loss limit of $1.5 million, the unit owners must make up the difference.
Unit Owner Coverage
Every unit owner becomes a policyholder under the condo master insurance policy. However, this does not mean they are fully protected. Each owner must obtain coverage for the interior of their unit. This coverage needs to insure the owner's belongings and liabilities. It's best to work with an experienced insurance agent to learn what coverage is needed for the unit owner in addition to the master policy.
When talking with this agent, consider the replacement value of personal possessions, as well as any upgrades made to the unit. Keep an ongoing list of this information for use if a claim needs to be made. Share changes to this list with the agent to ensure adequate coverage is maintained at all times.
Replacement Cost or Market Value?
When obtaining this insurance, determine whether to choose replacement cost or market value. Market value takes into consideration depreciation, which means the owner won't get the full value of their belongings if they are lost or destroyed. The replacement cost offers more comprehensive coverage.
Unit owners pay for the master plan as part of monthly HOA fees. As a result, they have some say in which policy is purchased and what level of coverage. In addition, unit owners should ensure the policy is updated regularly.
This review should take place yearly to ensure the association maintains adequate coverage. The policy should also be updated when the complex undergoes repairs or upgrades.
An agent becomes of great help when determining which level of coverage is needed, both for the association and for each unit owner. The agent works to close any gaps, which helps to save both the association and owners time and money. Speak to an agent today to ensure the right level of coverage is in place.