The Components of a Condo Insurance Policy

October 9, 2009

Condominium owners are in the unique position of owning their homes without being responsible for insuring everything. Condominium associations carry master insurance policies that cover the building as a whole, and the condo unit owners then carry separate insurance to cover their units and their possessions.

Personal Property Coverage
This coverage is essentially the same whether you rent or own. The purpose of personal property coverage is to enable you to replace your belongings in case of a covered loss. Make sure you know what you own and what it is all worth, then buy sufficient coverage.

Liability and Medical Expenses Coverage
Medical expenses coverage will help pay the medical expenses of an injured guest even if you were not negligent.

Building Property
This portion of the policy covers the unit itself. How much of the unit you need to cover depends on how your condo association's policy reads. Association policies vary based on state law and the association's articles. Make sure you understand exactly who owns what, so you can ensure sufficient coverage. In many cases the association's responsibilities stop at the bare walls of the unit. In other cases, the association may own some of the fixtures within the unit, such as cabinets or large appliances.

Regardless of what the association owns, be aware that any upgrades you make become your responsibility. This can sometimes cause difficulty in determining responsibility in the event of damage. For example, even if the association owns the walls, you own any wallpaper or paint you have put on those walls. If a wall is then damaged, who pays? If responsibilities are not explicitly spelled out, it can lead to a lot of finger-pointing after a loss.

Likewise, if you upgrade an appliance that the association owns, the association policy is responsible only for the value of the original appliance. You are responsible for the difference in value between the original and the upgrade.

Loss Assessment Coverage
This coverage is unique to condominium policies. It protects unit owners from assessments imposed by the condo association when it carries insufficient insurance coverage. For example, although the association's master policy covers common areas of the building, you may be responsible for losses that exceed the insurance payout. These assessments are especially likely when the association carries only actual cash value coverage.

Likewise, if the association has insufficient liability insurance, it may assess owners for the difference between what the insurance will pay and what the association must pay to settle a suit. Assessment coverage will help to protect you in cases like these. Make sure your policy fits your specific situation, spells out your responsibilities and covers any gaps in your association's master policy. Remember that basic policy coverages can be modified to suit your needs.

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