Condo associations have Master Insurance policies that cover common elements and events, but which rarely provide adequate cover for what you may be personally liable for without an individual HO-6 policy.
Most condo residents, when looking outside of the master insurance policy, tend to search for the cheapest and speediest individual insurance policy which gives only enough coverage to meet the lenders minimum requirements, but this could be an even faster route to getting hit with a bigger claims bill. Here’s why:
Gaps in coverage that put you at risk:
With more and more condo’s facing challenges due to water damage and freezing, as the claims rise and property damage costs increase, many insurance providers are starting to make changes to their existing coverage which could increase your risk exposure.
Let’s look at the differences between the coverage provided by master insurance policies, and those provided by individual policies:
Items not covered by master insurance policies:
These items are also not generally classed as the associations responsibility and can include:
- Personal property – this can include clothes, furniture, jewelry and money to name but a few
- Betterments and improvements – any upgrades that were carried out after the initial conveyance
- Additional living expenses – this can include the cost of living at a temporary location, storage fees, loss of rents etc
- Personal liability – this can protect you against bodily injury or property damage claims that arise from your unit
- Loss assessment – If the master policy limits have been exhausted but there is a covered cause of loss, then this would apply to all unit owners
- Medical payments – no fault coverage available for injured guests within your unit
However, if as a condo owner you purchase an HO-6 insurance policy – which is also required by lenders – the above items will be covered.
To avoid significant costs incurred by expenses that you may be held responsible for by the condo association under the master policy deductible – something caused by the owner’s act, neglect, misuse or carelessness – dwelling coverage should be included in every HO-6 policy.
As mentioned previously, there has been a rise in water damage losses causing carriers to increase their deductible, so reviewing your dwelling coverage is imperative if you want to avoid being out of pocket.
Many condo communities require that homeowners have at least $25,000 of dwelling coverage to indemnify them for the deductible expense in the event a claim arose from their unit, and if coverage is not available, the homeowner would have to pay this expense personally, or the association could place a lien on their unit.
Dwelling coverage should also include a homeowner’s betterments and improvements, including those completed by prior owners, and most lenders will require at least 20% of the unit’s market value insured under this coverage as well.
If you’re a condo owner and want to ensure that your insurance coverage is adequate, then speak to a professional insurance agent today, before it’s too late!