Condo Insurance

We have been insuring large and small condominiums in the South Jersey area for over 35 years, and currently have over 2000 association clients. We are committed to staying informed of issues that uniquely affect condominium owners and associations by our active membership in CAI (Community Association Institute), and IREM (Association for Real Estate Management) and South Jersey Condominium Property Managers Association.

Your insurance needs in a condominium should be closely examined because they are different from your needs when owning a traditional home. In a condominium, you own your own unit and an undivided interest in the common area. Make sure you have coverage on both.

The condominium master policy should protect you against loss of common property by fire and other hazards. The condominium association should also carry a policy to protect the shared property for which the association is responsible, such as recreational amenities, community walkways, and parking areas, from liability suits that may be the result of the use of the common areas as well as the acts of the association or its officers.

Association insurance policies do not cover your individual unit and personal possessions, so you should have a policy that protects your unit and any individually owned property against fire and other hazards, and personal liability.

Even though the common property is directly owned by the condominium association, the insurance covering it is important to you as an individual unit owner. If the condominium associations’s coverage is inadequate to cover damage from a loss, the difference will have to be collected from all unit owners through a special assessment.

Analyzing the master condominium association insurance program – see link below.

View/Download: Insurance Basics for Condominium Associations

Personal Coverage

Q. My association has insurance protection. Do I still need my own insurance?
A. Yes. Each unit owner is responsible for some items not covered by the association policy, such as; building items inside your unit (see important info below), personal contents, and personal liability.

Q. What type of policy and coverage options should I consider?

A. Occupancy	Policy Type	Estimated Cost
If you own and live in your unit	HO6 policy	$400 and up
If you own and rent to others*	HO6 policy with rental endorsement	$400 and up
*Year round tenants should show proof of HO4 policy (covers tenant property & liability)
If you own a Townhome or belong to a Homeowners Association, you may need a HO3 (Homeowens Policy).

Additional coverage options to consider which are not automatically included above are:

• Increased Loss Assessment coverage. Reimburses you for assessments made by the association in the event the association’s policy limit is not adequate to pay for a large loss and the loss is an insured peril on your policy. (estimated cost $3-$4 per $1,000)
• Scheduled property endorsement for jewelry, art, furs and collections. (estimated cost $15 per $1,000)
• Mold coverage endorsement. Protect from ensuing mold from a covered loss. (estimated cost $50)
• Personal Umbrella Liability policy. Higher personal liability limits for lawsuit defense. (cost varies)
• Flood insurance for your personal contents and building items your association does not protect.

Q. My policy for my primary home extends coverage to my unit, should I still purchase a separate policy for my unit?
A. Some primary home policies can extend coverage for personal liability, and a limited amount of personal property. However, there is no coverage for building items inside your unit or loss assessment coverage. So yes, it is better to purchase a separate policy that better covers your unit.

Items Inside Your Unit

Q. How do I determine what building items inside my unit I am responsible for insuring?
A. The Master Deed defines all insurance responsibilities for the association and unit owners. You should first review and understand two important definitions; “Unit”, and “Common Elements”. Then read the section titled Insurance. Although all Master Deeds are different, the Insurance section commonly states one of the following sentences regarding building coverage; “the Association must insure Common Elements” or “the Association must insure Common Elements and the Unit.” Then, depending on the definition of “Common Elements” and “Unit”, you can define your responsibility for building items inside your unit to one of the three common Master Deed interpretations shown below.

Association Responsibility	Unit Owner Responsibility
1. Exterior to wall studs	Sheetrock and everything in
2. Exterior to sheetrock	Wall/ floor coverings and everything in
3. Exterior and entire unit minus upgrades	Upgrades and improvements only
If you are still unsure of your responsibility, your property manager or insurance agent will assist you.

Q. Does the association policy always insure the items specifically defined in the Master Deed?
A. The Master Deed defines the minimum obligation of the association and unit owner. Each may purchase coverage that exceeds this obligation.

Q. Once I know what I am responsible for, how do I determine how much coverage I need?
A. This is often difficult to do. The level of quality (i.e. average, above average, custom) of you unit’s cabinetry, counter tops, flooring, wall coverings, molding , appliances, light fixtures, and other installed items will greatly affect the amount of coverage you will need. It may be best to calculate the value of each item with someone who knows constructions costs or your insurance agent. Ultimately it is your responsibility to choose enough coverage to meet your needs.

Claims

Q. Does the Master Deed section Maintenance, Replacement, and Repair have anything to do with insurance coverage?
A. No. This applies to maintenance of items that wear out which insurance commonly excludes.

Q. How do I handle damage from losses that begin in one unit and then damage another unit?
A. First report the claim to either your property manager if applicable, or the association insurance company and to your personal insurance company. If the unit owner where the loss began is negligent, then his personal insurance may ultimately reimburse your insurance company. If negligence is clear, his company may pay outright but negligence is often difficult to prove.

Q. If my association is responsible for building items inside my unit but the association policy has a larger deductible than my personal insurance deductible, can I submit the claim to my company?
A. You can purchase any limit of building coverage on your personal insurance policy but it is imperative before doing so to confirm with your insurance agent that your policy will respond on a primary basis for losses defined by your Master Deed to be insured by the association.