Insurance for Condominium Associations and Home Owners Associations

Condo Association Insurance is Designed for:

• Homeowners associations.
• Secondary associations.
• Seasonal associations.
• Timeshare associations.

The most important coverages in buying a Master Insurance Policy:

1.Property Coverage

It is important that you purchase enough coverage to replace your building. The replacement cost of your building is not the market value of all of the units added together, but the amount it costs to rebuild your building. Our agency provides you with a free replacement cost analysis, or you can go to Marshal & Swift to do your own in a few steps.

A pretty quick reference is that your building should be insured for about $200 per square foot above ground for brick construction and $175 per square foot for frame construction. If you are in more of a simple building or in a state where construction costs are lower, it certainly could be less. If you are in a state with higher construction costs such as California or New York, it could be more. Also, if you are in a very high-end building, it could go much higher.

“Walls Out” means that the insurance for the association covers the building structures, up to the uncovered drywall and sub-floor. They do not insure the paint on the walls, the carpet on the floors, or interior fixtures such as cabinets, toilets, and countertops.

“Walls-in” Means that the association’s master policy provides coverage for paint, carpet, and cabinets. Most governing documents requiring this type of coverage state that, in the event of a loss, the insurance for the association should pay to replace the unit back to its condition as it was originally built. If there have been upgrades made since then, such as a remodeled kitchen with a high-end build-out or the original flooring has been upgraded, the condominium owner would have to cover this replacement from their own pocket. To protect against this the unit owner would need to purchase their own policy (called an HO6 policy).

2. General Liability Coverage

It is standard to have general liability coverage at $1,000,000 per occurrence and $2,000,000 Aggregate.  This means if there is a general liability claim against your building (usually for slip and fall) you have $1,000,000 per incident with a maximum of $2,000,000 per year in total.

3. Fidelity Bond/Employee Dishonesty

This coverage protects the association if the manager or one of the board members steals the money in the bank.  You should have the amount of your reserve bank account and your operating bank account added together for your coverage.  This coverage is very inexpensive.

4. Directors & Officers Liability Coverage

This coverage protects you from being sued by your condo association for making a decision that adversely affects your condominium association.  This coverage is a must unless you are in an association 4 units or less and everyone is on the board. One of the most important features of this is that it covers attorney fees that are required to defend the association and board members. 

5. Building Ordinance Coverage

This coverage covers you to rebuild up to code and can be very important if you are in an older building and there have been code changes over the years.  This is most important if your building in the future will be required to rebuild with sprinklers.

Extra coverages

There are also extra coverages you should buy if you need them depending on your building and the part of the country you live in.  Below are the coverages you should look into:

• Sewer Back-Up Coverage– If you have a building with a basement, it is important to have this if the sewers overflow.
• Flood Coverage– This is required by law for your building to have if your building is in a flood zone.  This is different than sewer backup, for flood insurance only covers damage that comes from a body of water.
• Earthquake Coverage– If you are in an area prone to earthquakes, you should have this coverage.
• Extended Replacement Cost– This is a great coverage to have for it gives you a 10% to 25% buffer if your building has a total loss and you did not purchase enough property coverage.
• Business Personal Property– This is covers everything not attached to the building that the association owns.  This could cover items such as snow blowers and lawnmowers that an association might own.  Most smaller associations do not own much significant property and usually, this can be self-insured.

This is clearly a simple overview of coverages, but hopefully opens up some things to consider in purchasing your Master Association Policy.  Please feel free to call us at any time or fill in the simple form above for more information.  Thank you for your consideration and we hope you found the quick information helpful.

How Much Does Condominium Association Insurance Cost

For a small Condominium Association, the costs range about $97 per month. This is obviously only a general estimate. The major factors determining the cost of Condominium Association Insurance are:

• Size of Association: This is straight forward. An Association that has 500 units will pay more than an Association with 4 units.
• Type of Construction: Frame construction is more expensive to insure than masonry noncombustible construction that has proper fire divisions.
• Loss History: If the Association has had claims in the past, the premiums will be higher.
• Location of Property: Where the property is located has a great impact on cost. For example an Association located on the coast that is hit with seasonal storms will pay more than Associations located away from the coast.

Association’s Insurance vs Homeowners and Condo Insurance

A condo association insurance policy usually includes coverage for accidents and injuries that happen within the complex’s common grounds. Furthermore, a building’s exterior damage is normally under the association’s property damage coverage. Associations also have coverage for commonly owned personal and affixed property such as a tool shed. On the other hand, individual unit owners must be insured against damages and accidents that might happen in their units. If wallpaper in their living room rips off, the individual policy will cover the repair.

It is important to remember that the personal property of the individual unit owners is not covered under the master association policy. Personal property is furniture, clothing, electronics, and similar items located in individual units. There is also no coverage under the Condominium Association Insurance policy if someone is injured in your unit. With both homeowners and condo insurance, you will need to ensure you have enough coverage to protect the value of your personal belongings and against any claims for personal injury.

Frequently Ask Questions (FAQs)

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