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The ABCs of Condo Insurance
Perhaps you’ve bought a new condominium and just closed the deal. Ah, how nice that
your bank didn’t require you to buy a condominium unit owners policy, since the
association carries a master policy, right?
WRONG. If you dismiss condominium unit owners coverage as a frill, or don’t choose
carefully the policy you purchase, you could be placing in jeopardy the lion’s share
of your new investment.
Why? Because unlike homeowners insurance, you’re not insuring the entire structure.
Instead, you’re insuring your piece of the pie, and what’s included in that piece
can vary from condominium to condominium.
What You Need To Insure
Yes, your condo association is required to carry a certain amount of insurance.
However, that coverage is often limited to the “structure” which may mean only up
to the unfinished walls, floors and ceilings. To insure items that are your responsibility,
such as wall coverings, floor coverings, lighting fixtures, cabinets and countertops,
you need a condominium unit owners policy.
Josh Herz, vice president of Associated Agencies (with which Auto and Home Insurance
is affiliated), specializes in writing insurance for condominium unit owners as
well as condo associations. He stresses that association policies may “cover only
up to the drywall and primer.” If this is the case, it means that such costly furnishings
you might not consider possessions, such as custom-made cabinetry and hardwood floors,
are your insurance responsibility. Warns Herz, “If your unit is destroyed and the
association policy only replaces the unit to its shell, you could be out thousands
of dollars needed to finish the job.”
Items attached to the walls, floors and ceilings of your condo aren’t the only things
you should insure. You will need to make sure all of your personal property is protected
as well. Unlike a homeowners policy where your contents are automatically insured
for a percentage of the dwelling value, you will need to choose the limit for your
personal property. It is important to make sure your contents are insured for the
proper value since most condominium unit owners policies will pay to replace contents
at current prices.
Another type of coverage you need as owner of a condominium is loss assessment coverage.
As a member of your condominium association and thus, part-owner, you can be assessed
for a proportionate share of costs that the condominium association incurs. Whether
your building needs a new roof or new sidewalks, for example, you may be required
to pay your share. If there is damage to commonly owned property and it exceeds
the amount of coverage in the association’s master policy, a typical condominium
unit owners policy will provide some coverage if your condo association is forced
to assess all unit owners for the additional loss. Loss assessment coverage can
usually be increased up to $50,000 for a minimal charge.
Liability coverage is another important coverage in the event that you are sued
for accidentally hurting other people or damaging their property. Personal liability
helps to cover the associated legal costs and related damages. Most condominium
unit owners policies provide at least $100,000 of financial protection against liability
claims and lawsuits brought by others for accidental bodily injury or damage to
their property:
- while in your condo
- caused by your personal activities, including most sports
- caused by your children or pets
What other coverage should you consider adding?
- Coverage for sewer back-up and sump pump failure, which is particularly important
if your unit is on the ground floor
- An endorsement for jewelry, furs, artwork and other valuables, since most policies
contain specific limits on these types of items
- Coverage for other structures. You may own a separate structure such as a garage
or shed and if this is not considered common property, it would not be covered under
the condominium association's master policy. This coverage can be added or increased
on your unit owners policy.
- Flood insurance if you are one the ground floor, which must be purchased separately
Please call us if you’d like to discuss any of these important coverages. And keep
in mind these words from Josh Herz: “Condominium unit owners insurance can protect
you for very little cost.” So take action today – to protect the assets you now
enjoy.
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