By Bernie Cosentino, Vice President – Habitational
Insuring Your Condominium Or Co-op Apartment
When it comes to insuring your condominium unit or co-op apartment, just having a “piece of the rock” may not be enough. It’s the peace of mind of knowing you are insured correctly in conjunction with your association’s insurance coverage that will allow you to sleep soundly at night.
Every homeowners’ association, condominium or cooperative has governing documents including insurance bylaws dictating how the buildings should be insured. Unfortunately, there is quite often ambiguity as it relates to how the building should be insured from the perspective of the association’s insurance policy and what the unit owner or shareholder is expected to insure within their home.
In an effort to clarify this confusing subject, here are some useful guidelines you can use as a starting point to communicate how your buildings are to be insured and what residents should include in their individual HO6 policies.
Let’s start by reviewing the three ways documents may mandate how the community is to be insured. They are (1) Bare Walls, (2) Single Entity, and (3) All-In coverage.
Should the bylaws read that the association is insuring the buildings on a Bare Walls basis in the event of a loss, the building’s insurance policy would cover the damage from the studs out to the exterior of the building. Therefore, the resident’s HO6 would need to cover everything from the studs into the unit, which includes sheet rock, paint, flooring, fixtures and the like.
If the bylaws call for Single Entity coverage, also known as “original specifications,” this would mean that a covered claim would be the responsibility of the building association from the exterior into the units including walls, flooring, fixtures, and the like as delivered at the time of conveyance by the builder. The resident’s HO6 would need to cover any upgrades, additions, alterations or betterments that the unit owner had put in after delivery by the builder.
Lastly, All-In coverage has the community’s policy provide coverage for everything mentioned in Single Entity coverage as well as upgrades, additions, alterations or betterments. This is not seen as often in condominium documents as it is in co-op documents. In this case, unit owners or shareholders would not have to carry very much property coverage on their HO6 as it would be provided under the building’s insurance policy.
In the event of a loss to a unit, replacing the resident’s personal belongings are never the responsibility of the association or co-op. It is essential that unit owners inventory their personal belongings and make sure they have adequate coverage in their individual policies. I have always been an advocate of taking a video of the entire unit, cataloging all of the personal items that may be lost in a fire or other covered-peril loss.
Let me reiterate that these are all just starting points. Very rarely do the documents spell out how a community is required to be insured. It is very important that the documents are reviewed by the community’s legal counsel as well as insurance agent when making a determination regarding the insurance requirements. Prior to placing coverage, the agent must inform the carrier of his or her determination of the governing documents so all parties involved are on the same page at the time of a property loss. Not only so the community insuring the property is in compliance with its documents, but so it can also inform the residents as to what they are required to insure in their HO6 policies. If the bylaws are very unclear, it may be a good idea to amend the documents in order to provide more clarity to all parties.
Once all parties are on the same page with how the buildings should be insured, it is important to communicate this information to the residents.
JGS Insurance Agency, a leader in residential building insurance, has insured associations and condominiums since the 1970s. We always supply our insureds with a document we call a fact sheet and include it with every policy we deliver to the communities we insure. This fact sheet lays out exactly what the association is responsible for insuring and what the residents should be insuring on their HO6 policies.
Hopefully, this information will go a long way in identifying how your association is insuring your property and what is expected of the residents, all in order to provide everyone with the Peace of Mind they deserve.