Condo Association Insurance

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What is Condo Association Insurance?

A Condo Association Policy is purchased by the association of a condominium building or townhouse/villa. This provides coverage for the building itself along with common areas such as walls, elevators, hallways, stairways, sidewalks, parking areas, community pool and any other buildings or fixtures owned by the association.

The cost of the policy is spread through the owners of the units in the building, typically called association dues. Usually this covers any additional expenses the community has. This type of policy does not cover the unit owner for liability or the inside of the unit or the owners or renters personal property.

It is very important that the unit owners purchase their own coverage for the interior of the unit and personal property.

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Why is it Important?

Condo association building coverage is very important coverage to maintain. To not do so would be a gross negligence to the unit owners in the event of a fire, windstorm or other perils the policy covers for. Not doing so could result in legal issues with the owners of the units along with any other persons that could become injured on the property and file a lawsuit. It is also a requirement by most banks if the property is holding any type of mortgage or loan note. It can also be a requirement voted in by the association

How Much Coverage is Needed?

The amount of coverage required is calculated by a certified appraisal of the building itself along with any other detached buildings on the property. Condo association policies have a co-insurance clause attached to them as well. Usually requiring a minimum of 80-90% in order for the claim to be paid sufficiently. Not being insured correctly could result in out of pocket expenses to the association for rebuild, these fees would more than likely be passed down to unit owners as a special assessment.

Liability coverage should be at least $300,000 as offered as a maximum by some carriers, however $500,000 or $1,000,000 should be considered due to the high exposure associated with these risks. The premiums tend to be pretty high due to the exposure and higher deductibles are an option to help offset the cost. In addition to offering higher deductible options, the building may be eligible for other discounts such as windstorm mitigation discounts. Windstorm mitigation credits could be for a newer roof, shape of the roof and hurricane shutters or impact rated windows.