Condominium association insurance protects condo owners from legal claims, liability, and unforeseen costs when something goes wrong on condominium grounds. Providing a safety net for condo members, condo association insurance helps shield board officers and condo owners from financial culpability in accidental and other circumstantial events.
Every condo association is unique in size, services, and other features, making the type of policy your condo community requires complex. To learn more about condo association insurance, how it works, and why your association may need it, read on.
What is a Condo Association?
In a condominium complex, the ownership structure is unique. All owners not only own their individual units, but they also share the ownership and responsibility of maintaining common structural elements and amenities. In a condominium owners’ association (COA), the individual owners own a percentage of all shared property—the association doesn’t have ownership of any real estate.
Condo Association Insurance: 8 FAQs
Understanding these basics of condo association insurance coverage is vital to making the most informed decisions for your community. Find expert answers to frequently-asked questions about condo association insurance here.
What is condo association insurance?
Condominium association insurance coverage, also called a master condo policy, is a type of insurance designed to cover the cost of condo property damage, protecting association members against liability. Much like a homeowners’ association (HOA) master insurance policy, coverage for condominiums may provide protection in common areas like:
- Swimming pools
- Dog runs
- Walking trails
- Parking lots or garages
What does condo association insurance cover?
In a condominium, it can be difficult to distinguish between common areas and an individual’s property because many elements are shared. However, the general purpose of condo association insurance is to cover unexpected costs that result from damage, accidents, and injuries in shared spaces. A master insurance policy will detail exactly what the insurance covers and for how much.
Some types of master condo policies include:
- Bare-walls coverage. This policy covers the building’s exterior and structure, including walls, wiring, insulation, and plumbing.
- Walls-in coverage. This policy typically covers some of the original interiors of condo units, such as flooring and cabinets. However, it usually doesn’t cover upgrades, custom designs, or the owner’s personal property within the unit.
- All-in coverage. This type of policy offers more protection with coverage of other installed features like lighting fixtures, lobbies, and entryways.
Are you covered appropriately? Click here to download our “4 Steps to Ensure Comprehensive Community Insurance Coverage.”
Who buys condo association insurance?
Because a master insurance policy limits financial risk for the association and its members, many governing documents require a form of insurance. Board officers are often responsible for finding the best condo association insurance and securing the minimum coverage.
If your COA already has insurance, it’s a good idea to review your policy regularly and even shop around for other coverage options. Condo association insurance can be more complicated than other types of coverage, so find an agency that specializes in condo association coverage and offers free estimates and consultations. You may be able to find a policy that better fits your community’s needs and budget.
Who pays for condo association insurance?
Condominium owners pay for condo association insurance through their regular dues or assessments. As members of a COA, condo owners pay dues that help fund all aspects of the association, including:
- Daily operations
- Repairs and maintenance
- Community improvements
- Reserve funds
- Condo association insurance
Payment for the insurance coverage is evenly distributed between association members by dividing the cost and including it in the assessments.
What does condo association insurance cost?
Because every COA is different, the cost of condo association insurance will vary among communities. Multiple factors can affect the overall cost, including:
- The number of common areas on the property
- Increased risks due to location
- Requirements outlined in the governing documents
Some condo associations have several shared structures or community amenities that may call for more comprehensive coverage. Also, your community may be in an area that frequently experiences earthquakes or floods, making it important to include protection from natural disasters in your policy. Keep these considerations in mind when getting estimates and consulting with insurance brokers.
What’s the difference between condo owner insurance and condo association insurance?
Condo association insurance offers financial protection for all association members—specifically in shared or common areas of the community. On the other hand, condo owner insurance protects the owner’s personal unit, including the belongings within the condo. An individual insurance policy for condo owners will also have personal liability coverage that protects them in the event that somebody is injured in their unit.
In many cases, mortgage lenders will require condo owners to purchase a policy to protect them from financial risk. It’s important to understand that this is separate from condo association insurance, which only covers shared community spaces. If you want coverage for your private unit, you must purchase your insurance policy individually.
What are my community’s basic condo association insurance requirements?
If you’re unsure of your community’s COA insurance requirements, check your governing documents. They will provide details on the coverage you need for your association, which isn’t necessarily the bare minimum offered by the insurance companies. Based on your community requirements, you may need coverage like:
- General liability protection
- Property coverage
- Directors and officers (D&O) insurance
- Discrimination claims coverage
- Workers’ compensation
How do you handle condo association insurance claims?
As a board member of a condo association, you must understand the claims process. Make sure the board is familiar with the association’s policy and what’s covered. If there’s an accident or damage to shared areas of the property, file a claim with your condo insurance carrier.
Depending on the type of claim, there may be different steps throughout the process, including documenting damage, obtaining estimates, or filing a police report in some cases. Refer to your policy and work with your insurance representative and association attorney to guarantee your claim is as thorough as possible.
Professional advisors, like association attorneys, are essential to a board’s continued success. Click here to learn what other providers matter most to a condo association board.
HOA Insurance FAQs for Beginners
The right insurance policy will protect condo owners from having to pay for property damage or legal claims directly from association funds. However, securing the best coverage for your community starts with understanding why having a master insurance policy is so crucial. Check out our ebook, “HOA Insurance FAQs for Beginners,” to learn everything you need to know about insurance for homeowners’ associations!