Condo management, whether you’re a property management company or a condo association, each comes with its own unique challenges. Your relationship with individual condo owners is crucial to successful condominium risk management. One of the most important topics where clear communication with your condo residents is essential is insurance compliance. Condo owners often misunderstand their coverage needs, which can leave them vulnerable to loss.
Master Insurance Policies vs. Condo Insurance
Condo associations and property management companies have master policies that cover the common areas and the building’s physical structure. However, this policy doesn’t cover individual condo units. In the event of a major fire loss or property destruction, it doesn't cover individual owners’ personal belongings, or any home improvements they may have made to their units. The master policy also doesn’t cover an owner’s liability to others.
As a condo association or a property management company, it’s vital to ensure owners are fully aware of their insurance obligations and the coverage gaps they may face. Here, we’ll explore the six key condo insurance (also known as an “HO6 policy”) must-haves for every condo owner.
1. Personal Property Coverage
It’s important for unit owners to maintain a personal inventory of their belongings. Items such as appliances, furniture, clothing, electronics, and other items are covered as personal property. Establish a value to replace these items and always ask for replacement-cost coverage.
2. Liability Insurance
We recommend that every owner carry a minimum $300,000 limit for personal liability insurance. Each owner should review their coverage needs in detail.
3. Special Items Coverage
Ensure your policy provides coverage for special items such as jewelry and fine art.
4. Real Property Coverage
Real property (also known as “Dwelling” or “Additions and Alterations”) isn’t covered by the master policy. Their real property, which is usually described in their condo documents, may include decorated interior walls, floor coverings, fixtures, heating and air-conditioning units, and any other interior alterations.
5. Additional Living Expenses
Ensure the policy reimburses the owner for temporary living arrangements in the event of a covered loss.
6. Loss Assessment Coverage
Loss Assessment Coverage is often overlooked by condo owners. Most policies offer $1,000 in coverage; however, higher coverage options are available. This pays for special assessments charged against the owner by the association for damage to common areas. It doesn’t cover normal fees or assessments for condo maintenance.
Condo associations and property management companies play a crucial role in communicating with owners about their unique condo insurance needs. This is important for protecting the entire community. By ensuring that condo owners understand the distinctions between condo association coverage and individual responsibilities, you can help them avoid costly surprises in the event of damage or loss. A proactive approach now can save significant stress and financial strain in the future.
