Condo Owners Insurance
Condo owners need insurance to cover personal property and liability, just like the owner of a house. But there’s more – condo owners need a policy designed to cover some situations specific to condominium units.
How much of the condo do you own?
Your condo association should have insurance to cover the building and common areas, but where their insurance ends and yours must begin depends on the association agreement. This might be called the “Declaration of Condominium” or “Master Deed.” This document will define your responsibility as the unit owner.
Definitions vary but generally fall into two main categories: “air space” concept and the “bare walls” concept.
“Air space” Ownership (also called “paint-in” or “What I bring in”) - You own the inside of the unit, starting from the unfinished interior surfaces – walls, floors and ceilings. This generally does not include fixtures or built-in appliances. You might only be responsible for insuring your own belongings such as furniture, electronics and clothing.
“Bare walls” Ownership (also called “studs-in”) - Your ownership is broader, starting from the roof trusses, floor slabs and exterior walls of the building. This generally includes interior walls, stairs, doors, closets, cupboards, built in appliances, and heating and cooling systems. You will need broader insurance coverage for this type of condo agreement.
Are you covered for loss assessments?
Sometimes, condo owners are assessed by their condo association for losses “outside the walls” that were not completely covered by the association’s policy.
For example, say you are assessed for dollars to repair damage to common property (i.e. a pool house). The reason you were assessed is because the damage exceeded the amount of insurance available in the association’s master insurance policy. If the damage was caused by windstorm, the assessment coverage under your condo policy would kick in because windstorm is covered by your policy. However, if the cause of the damage was flood your policy would not pay because flood is not covered by your policy.
If an assessment is charged to cover the cost of painting the exterior of the clubhouse simply because the association decided it was time to paint, your coverage would not kick in due to the fact that there has been no covered loss.
Your assessment coverage will also kick in to help cover the cost of the master policy’s deductible. It may also pay for liability assessments resulting from claims of bodily injury or property damage as well as liability for your decisions as an uncompensated association director or officer.
Why might there be a loss assessment?
Unit owners may be assessed because of inadequate or no coverage under the association’s policy. Here are some examples:
- The association did not purchase enough insurance to cover their property.
- A guest is injured on the property and sues the association for more than their policy liability limits.
- The damage is caused by something not covered by the policy, for example, earthquake.
- One of the conditions set forth in the policy is not met.
- The association’s policy includes a high deductible.
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