What Does Your Condo Insurance Cover?
Do you know what your condominium insurance covers? If you look at your Master Insurance Policy, or CC&R, you should be able to find out. Usually, it covers the Building Property (your unit, in the condition in which you purchased it, and permanently attached building improvements such as walls, fixtures, and cabinets).
Though the building may be covered, there are a few exposures that still need to be covered by your own insurance. There is a lot of variance between particular policies, however, so be sure to show a copy of the policy to your insurance agent so they can ensure you are getting the right coverage for your situation.
Building Coverage
If your condo association has a $10,000 deductible on their Building Coverage, then $10,000 is what you need to cover on your personal condominium policy.
So if you had a $10,000 deductible, and had coverage for it, what would happen in a loss, such as a fire? Who would pay what?
(example of claims situation)
Total Loss: $40,000
Deductible from Your Personal Condo Policy: $500
Total Loss on Personal Condo Policy, paid by company: $9,500
Condo Association’s Master Policy pays: $30,000 (pays balance after deductible threshold is met)
In this situation, you could have been left to hold a $10,000 bag had you not gotten your Personal Condominium Insurance, but because you had it, only paid $500. These totals do not yet include the cost of replacing property (bed, clothes, appliances, electronics, etc) that was damaged, nor the expenses incurred from living somewhere else while your unit’s repairs are underway. Without the proper coverage, these costs can snowball and leave you in financially murky waters. With the cost of these policies hovering around $100 to $300 per year, it simply makes sense to get yourself covered.
Personal Property
Personal Property is what you put in your Condominium. If you took your home, turned it upside down, and shook everything out, pretty much everything that would fall out would be considered Personal Property.
When figuring out what type and how much coverage to get, don’t think about how much your belongings cost you originally… Rather, chew on this: How much would it cost you to replace them?
There are two ways to replace your items through insurance. The good way, and the bad way.
The Bad Way: Actual Cash Value (ACV). If you bought your bed for $1,000 four years ago, you might be able to pull $75 for it if sold on Craigslist. And that is what you would get if it were destroyed in a loss. Basically, you get the value of the item back, MINUS the depreciation.
The Good Way: Replacement Cost Coverage. If your four year old mattress is torched in the fire, with Replacement Cost Coverage, you get to replace “New for Old.” Your old mattress is replaced by a new a new mattress of the same brand with the same features. There are a few limitations and exclusions to this type of coverage, so be sure you talk to your agent about it.
Make sure you are able to track what you own for an accurate claim in the event of a loss. Think you know your stuff? Try this little experiment. Pick a room in your home and write down all you can think of. When you get home compare your list to the actual contents in the room and I can assure you that many things there will have been left off your list.
Many websites, like http://www.knowyourstuff.org can help you track your belongings. If you’re going to pay for the coverage, make sure you use it to its full extent.
Loss of Use Additional Living Expenses
If your condominium had damage that made it unlivable, where would you go? How would you pay for it? Depending on the severity of the damage, you could be out of your home from a week to several months or more while your unit is undergoing repairs. During repairs, you’re staying at a temporary apartment, but on the first, you end up with rent due as well as your mortgage payment for your condominium. Without condominium insurance, these costs come out of pocket. This coverage protects you from additional living expenses and costs associated with it, such as eating out, laundry, storage of personal property. It won’t take care of your condo payments, or other unrelated bills, it will cover qualified additional living expenses while your condominium is being repaired.
Personal Liability
With this coverage, the insured is protected from liabilities whether at home or away. It protects you in the event you are sued for accidentally hurting other people or their property and helps cover associated legal costs.
Optional Coverages
Earthquake Insurance is important to consider. Unless your association carries earthquake insurance (and even if they do, it is best to look further into the coverage with your agent to ensure you’re protected), you will need to add Earthquake Insurance separately from your condominium insurance. Damage from earthquakes are not covered by your normal condo insurance policy.
Floating Article Insurance is critical if you own expensive electronics, computer equipment, jewelry, antiques, or collectibles. It is a special coverage that is tailored specifically for expensive items that shouldn’t be filed under the wing of your normal condo insurance policy’s personal property limits.
Loss Assessment Insurance is designed for owners in condominiums and associations. Since associations may assess fees for certain kinds of losses (such as an expensive claim that isn’t wholly covered by the association’s master insurance policy), where their master policy fails, yours will pick up. Your portion of the claim that needs to be paid is paid instead by your Loss Assessment Insurance policy.
Living in a Condominium has many advantages and many opportunities. Understand your responsibilities to your association in being a good partner to reduce unnecessary losses. Talk to an insurance agent today.
(877) 783 – 0335
© 2008, Mark S. Balcos. The reader assumes all responsibilities for his/her own actions in regards to any items discussed in this report. Adherence to all applicable laws and regulations, federal, state and local, governing the use of any product or service described in this report in the US or any other jurisdiction is the sole responsibility of the reader. The publisher and author assume no responsibility or liability whatsoever on the behalf of the reader of these materials. The reader is encouraged to consult directly with his/her insurance professional.
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