Insurance coverage for your home is anything but simple when you live in an HOA or COA. Some people think that if they live in a Condominium or Homeowners Association that they don’t need to purchase individual homeowner’s insurance. Another misconception is that all exterior items on a Condo or an HOA are the Associations responsibility and that damage to or caused by those exterior elements are covered by the Associations policy. Unfortunately, is not that easy or simple. First of all, every association is different on who is responsible for what and what and when damage is covered by the associations insurance policy.
Some people think all exterior items on a Condo or an HOA the Associations responsibility and that damage to or caused by those exterior elements are covered by the Associations policy.
Unfortunately, is not that easy or simple. First of all, every association is different on who is responsible for what and what and when damage is covered by the associations insurance policy.
So where do you start?
We start by looking at the association governing documents. These documents will tell you:
- Your unit boundaries
- What element of your unit is considered part of the unit, a limited common element or a common element and who is responsible for what.
- The insurance coverage that the association is required to carry.
Next you want to know about the association policy, what it covers and what the deductible is.
Most insurance carriers will provide management with a letter to send to all the homeowners every year. This letter explains what kind of policy you should have and what the deductible is.
If you live in a Condominium, the coverage you will need is called an HO6 policy. You want to make sure that this policy will cover you up to the Associations deductible. The reason being is that if there is damage to your unit, and the cost to repair that damage fall under the associations deductible, the associations policy will not cover the damage, regardless of the cause.
This policy should cover your personal property, and loss of use.
If you live in an HOA, the policy you want to look into is called an HO3 Policy. Again, start by looking at the associations coverage and deducible.
This policy is more involved that an HO6 because it will cover the replacement cost of the entire dwelling, your personal property and contents, additional living expenses and liability. You want to look at the associations coverage and deducible as well.
If you own the property as an investment and have a renter in the unit, you should require that they have an HO4 or renter’s insurance policy.
Every community is different therefore the coverage in each community differs, but you want to be covered.
So here are a couple of scenarios where people get confused about coverage in an association:
There is a leak in the roof of the condominium after a rainstorm. A unit owner on the top floor has water stains on the bedroom ceiling caused by that leak. The Association is responsible for maintaining the roof and it leaked, who pays for the damage?
That depends on the cost to repair the damage.
Management should always direct the homeowner to call their insurance agent first and foremost. The agent will come out and assess the damage. If the cost to repair the damage is under the associations deductible, then the association is under the associations deductible, then the association is not involved, and the homeowner may or may not want to put a claim into their individual policy.
A main sewer stack that services multiple units in a building broke causing damage to the interior of a unit. The associations deductible is $2,500 and the cost to repair the damage to the unit is $5,000. Who pays now?
Again, the homeowner first submits the claim into their own Homeowners insurance policy. The Individuals homeowner’s agent will contact the Associations policy holder with the claim and estimate of repairs. The individual’s policy will pay up to the amount of the ($2,500) deductible and the associations policy will pay the cost of what left over the deductible. ($2,500)
The water heater on the third floor of a midrise condominium leaked into the unit on the second and first floors causing considerable damage to each unit. Who pays for the damage?
Once again, the unit owners who sustained the damage need to call their insurance agent. This is a situation where it is between homeowners and their insurance agents. Agents will communicate and subrogate as to who is responsible for what.
The scenarios for each association will vary depending on how the governing documents read, the associations policy and it’s deductible.
The best way to protect yourself is to know your community’s documents, ask management for a copy of the Declaration Pages of the Associations insurance policies and provide them to your agent. Encourage your agent to talk to the Associations agent to ensure that you are fully covered in case of a claim.