Condominium or Co-op? Your Insurance Needs are Different!

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• The first step toward correctly insuring your condominium or co-op begins with a review of your condominium unit owners association document or co-op incorporation papers. Be sure you receive a copy of the document before purchasing the condominium or co-op. Have your agent review the document if the agent is not already familiar with your condominium or co-op by-laws. Important items to review:
• What property is your responsibility to insure? From inside the walls? The internal walls? The appliances? Your separate and detached garage?
• What is the potential for loss assessment after a fire? Does the association or corporation insure the buildings owned by the association to replacement value? How high is the association's deductible? What is not insured?
• Are there any coverages, limits or additional interest endorsements you must add to your policy as required by the association agreement or incorporation document?

Find a company that wants to insure your condominium or co-op. Some companies do a better job with new construction, and others excel in reconstructed warehouses or factory loft-type condominiums.

There are two types of coverage: Named causes of loss or risks of physical loss.

• Named causes of loss coverage is just that. The policy only covers for certain kinds of causes of loss to your property. You must prove to the company that one of the covered causes damaged your property.
• Risks of physical loss covers all causes of loss except those that are excluded. The company must prove that one of the excluded causes of loss damaged your building.

Many companies offer risks of physical loss coverage for that portion of the building or real property that is "yours" and named causes of loss coverage for your "stuff." Other companies will offer risks of physical loss coverage for virtually all of your covered property. Risks of physical loss costs more, but here are some claims that would not be covered under named causes of loss policies:

• The washing machine in the spin cycle danced across the room and broke the water heater, causing water to cascade throughout the home.
• A guest injured herself and bled all over the couch and carpet.
• While the insured cleaned the imported crystal chandelier, the chandelier fell, shattering into pieces.
• While working on the attic floor joists, the insured slipped and put his foot through the ceiling.
• A two-year old boy went on a rampage with a hammer, smashing the bathroom toilet, sink, walls, etc...
• The insured dropped a storm window. It tumbled through the home, down the stairs, damaging walls along the way.
• The insured was cleaning the bowling ball in the bathroom sink - the bowling ball slipped and shattered the sink.
• The insured's lawnmower kicked a rock through the exterior air conditioner.
• The insured slipped and threw a full paint can into the room; the spatters hit virtually everything in the room.
• Freezing and thawing of ice on the roof caused a break in the wall and water damage to the interior of the home

The policy name for named cause of loss coverage for condominium or co-ops is often referred to as Homeowners Form 6. To add risks of physical loss to personal property and the part of the real property (building and fixtures) for which you are responsible under Form 6, you must have the Homeowners 17 31 and Homeowners 17 32 endorsements.

NOTE: Your state may have restrictions or natural disaster cause of loss problems. Coastal states face wind problems. California and certain Midwestern areas have severe earthquake problems. Some western states have brush-fire problems. Other areas face hail damage. Each state and company has its own rates and philosophy on how it will insure these common causes of loss. Be smart. Check around.

Basic homeowners coverages common to all homeowners form that insure both condominium or co-op real property you are responsible for, and personal property:

• Real property: Coverage for the structural part of the condominium or co-op you actually own. Usually, the interior walls, appliances, fixtures, plumbing, heating and electrical that services your property, carpeting, flooring, Jacuzzi's, possibly private garages, and other improvements you make to the property that do not become a part of the building that is owned by the association at large. You work with the agent to establish the replacement cost of your real property. You must insure to 80 or 90% of replacement value to avoid any kind of "under-insurance" penalty if you have a loss. These penalties can include reduced payment, or change from payment on a replacement cost basis to actual cash value. Actual cash value means depreciation. Work with your agent to make sure you insure to value.
• Coverage for personal property ("stuff") is often combined with your real property insurance. Most people who live in a condominium or co-op have personal property values similar to people who own free-standing homes. How much "stuff" do you own? Is it new, is it of superior quality?
• Loss assessment. After a fire or other covered cause of loss, the condominium or co-op association may assess all of the owners for the repairs to the property to reimburse the association or corporation for deductibles, under-insurance or even no insurance. The standard Homeowners 6 policy give you only $1,000 loss assessment coverage. If you need more coverage you can add more to your policy.
• Additional living expense coverage is usually a percent of your personal property limit of insurance (20-40% or even no limit or actual loss sustained). Additional living expenses covers the additional cost of temporary housing, food and other increased costs of living when you are forced from your condominium or co-op by a fire or other covered cause of loss. If you have a tenant, the condominium or co-op form can cover your loss of rents if rent payments (by contract) do not continue after a covered loss. For most customers, the limit of coverage provided by the standard policy will be adequate; but if your condominium or co-op will take a long time to repair or the loss occurs in the dead of winter, you may not have enough to pay the extra living expenses. If you are in a disaster prone area (tornadoes, hurricanes, earthquakes, wildfires), we have seen recent occurrences where it has taken 2-3 times the normal time to repair property because materials and workers were overwhelmed with work or unavailable. Actual loss sustained coverage is best, for there is no limit to worry about.
• Endorsements: Sump pump, ordinance or law, business in the condominium or co-op. Companies make available literally hundreds of endorsements to provide additional coverage not found in the standard condominium or co-op policy. This is where you need a good agent who specializes in condominium or co-op insurance. Let the agent ask you a lot of questions. The agent needs answers to build the right policy for you. Condominium or co-op unit owner policies are not cookie-cutter forms. Every family's needs differ and a good agent can help you design the correct plan for you.
• Theft limitations. This brief article is not the forum in which to discuss every limitation and exclusion under the condominium or co-op form. However, you need to know that certain "target" items have limited coverage for theft. The limit shown is the average limit in the market. Your company may provide less or more. Increase coverage by endorsement to the policy. (For more detailed information on insuring this valuable property see Jewelry, furs, guns, silver, goldware, fine arts, antiques, and other expensive stuff.
  • Jewelry and gems ($1,000)
  • Furs ($1,000)
  • Gold, silverware, pewterware ($2,500)
  • Guns ($2,000)
  • Building supplies - no coverage for theft
• Other property limitations. The following property is subject to certain maximum limits of coverage. The limit shown is the average limit in the market. Your company may provide less or more. Increase coverage for most by endorsement to the policy.
  • Electronics used in an auto ($1,000)
  • Money ($200) including coin collections - face value only.
  • Stamps ($1,000)
  • Business personal property ($2,500 on, $250 off premises)
  • Other than boat trailers ($1,000)
  • Boat trailers ($1,000)
  • Boats - anything bigger or more valuable than a canoe - purchase a separate boat or yacht policy.
  • Credit card forgery ($500)
  • Fire department service charge ($500)
• Fine arts, antiques, Persian rugs, Hummels and other collections should be appraised and listed separately in a personal articles floater or endorsement.
• Your personal property "stuff" can be covered for replacement cost. That five-year-old refrigerator that is only worth $100 but would cost $600 to replace could be covered for $600 for this endorsement. Ask for replacement cost contents coverage. When you add this endorsement, make sure your limit of insurance is adequate to cover all of your "stuff" for replacement cost. (See How much are your possessions worth?)
• Liability coverages are usually identical from form to form. Some companies will have special endorsements to improve coverage. Liability covers you for your negligence in injuring other people or property on your premises (those accidents for which the condo association is not responsible) or through actions related to many of your hobbies. The policy also provides defense coverage, including hiring and paying for a lawyer (if necessary) and paying most court costs. Covered claims include slips and falls, baseball beans the neighbors' child, you hit the foursome in front with your errant hook shot. Homeowners insurance does not provide you with any car insurance for any car you drive. High limits of insurance are recommended, and you should ask your agent about an umbrella policy to increase your coverage to $1,000,000 or more.
• Why high limits of liability insurance? Anyone can sue for any limit. If your policy covers you for $100,000 liability insurance and you are sued for $200,000, your insurance company will advise you that you need to hire a lawyer. If the insurance company pays out the $100,000, its obligation is over, but the lawsuit may not be settled. Courts are backed up. The high cost of lawyers, whether good or bad, is not exaggerated. The injured party may not have to pay a dime in attorney's fees until the lawsuit is won. You don't have that option. Your defense lawyer will want to be paid from the day of hire, often for each hour worked - even if you eventually lose the case.
• Medical payments coverage is for minor injuries to people other than residents of the household. You don't have to be sued or be negligent. Example: Aunt Bertha from 200 miles away comes to visit for a few days. The day she arrives she slips on your transom and breaks a hip. The insurance company will pay up to the medical payments limit ($1,000 to $10,000 normally) for the medical expenses incurred. After the medical payments limit is used up, you must be negligent and/or sued by the injured in order for that person to be reimbursed for the expense.
• Cutting costs? Deductibles save money. Combine your auto and condominium or co-op insurance with the same company. Many companies offer discounts on both auto and home when you insure them together (not available in all states). Some companies offer combination auto/condominium or co-op policies which usually provide superior coverage at a lower price than if you were to cobble all the coverages together using many policies (not available in all states).

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