Get the Right Condominium Coverage

Properly arranging the insurance for our clients who own a condominium or townhome takes some diligent effort. And it starts by closely reviewing the association's "declaration" document, which details what real property the unit-owner is responsible for insuring separately.

For example, condominium association rules and covenants affect insurance exposures by determining what categories of building property are owned by the association—and thus insured under the association's master policy—and what property is individually owned by the unit-owners—and thus to be insured under the unit-owners' policies, such as the Insurance Services Office, Inc.'s, Homeowners 6—Unit-Owners Form (HO-6).

In most cases, the association's master policy insures the condominium building, per its bylaws, in one of three ways.

• All in. The condo association covers the entire building, such as the common areas, the units themselves, and improvements to the units.
• Single entity. The condo association covers the common areas plus the units themselves. The association, however, does not cover any building improvements performed by the unit owner; the unit owner is responsible for insuring those.
• Bare walls. The condo association covers the building's common areas, whereas the unit itself plus any improvements are the unit owner's responsibility.

Not only do we craft condominium coverage based on the condominium associations' bylaws, but are also aware of the ever-growing master policy deductibles.

This area is where coverage gaps can dramatically pop up for many unit-owners since policies such as the HO 6 only provide $1,000 in loss assessment limits. Association master policies often are written with $10,000 deductibles, but condos in hurricane-exposed coastal areas may have deductibles ranging from $25,000 to $100,000.

So, the best advice for our insureds is to look carefully at the insurance specifications in the association's "declarations" document, obtain an accurate estimate of the replacement cost of the real property for which the unit-owner is responsible (often including any improvements and betterments), and select this amount as the dwelling limit. Bumping up the standard assessment limit, including assessments arising from a high master policy deductible (the latter often requiring a negotiated manuscript endorsement) and expanding coverage from named perils to all risks, may also be in order.

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