A condominium unit owner usually has their own insurance policy that covers for loss of personal belongings, parts of the building that the condominium agreement makes individual owners responsible for insuring, the additional cost of living elsewhere after a fire damages a unit, and legal liability for injuries or damages suffered by others. In turn, the condominium association has its own policy, which might cause some unit owners to wonder why they have to buy separate insurance. Doesn’t the association’s insurance cover the same things? Depending on the property at issue, the answer is maybe yes and maybe no. Insurance companies designed the two types of policies to complement each other in some cases and to overlap in others. Here are five things unit owners should know about their associations’ insurance.
The association’s policy covers the building. Depending on the wording in the contract between the association and the unit owner, the word “building” may mean several different things. If the contract requires the association to insure them, “building” can include fixtures, improvements and alterations that are part of the building and that are within a unit. For example, if a unit owner installs new track lighting or an attached island in the kitchen, the association’s insurance would cover the cost of repairing or replacing them after a loss. Also if the contract requires, the association’s insurance will cover various appliances such as refrigerators, stoves and dishwashers.
The association’s policy covers personal property “owned indivisibly by all unit owners.” Furniture in the building’s lobby, hand carts and other moving devices, and exercise equipment in an exercise room available to all residents are examples of the types of property that the association’s policy insures.
The association’s policy does not cover the unit owner’s personal property. A unit owner must buy their own insurance to cover furniture, electronics, clothing and other belongings. Assume, for example, that the condominium contract requires the association to insure appliances. If fire damages a unit owner’s space, the association’s insurance will cover the refrigerator but not the sofa. The unit owner’s policy will cover the sofa. The association’s policy also does not cover an individual unit owner’s legal liability for injuries or damages suffered by others. The unit owner needs their own insurance to provide for legal defense and to pay any judgments.
It is possible that both policies may apply to the same item of property. In the above example, both the association’s and unit owner’s policies may cover the refrigerator. In that situation, the association’s policy will apply first; if it does not completely pay for the repair or replacement, the unit owner’s policy will cover the balance. For example, if the cost of replacing the refrigerator is $5,000, and for some reason the association’s policy covers only $4,000, the unit owner’s policy will pay the other $1,000 (the example doesn’t include deductibles that may apply.)
The association’s insurance company will not try to get its money back from a unit owner. Suppose a unit owner left a candle burning overnight and the unwatched candle caused a fire that damaged part of the building. Many types of insurance policies would allow the insurance company to pay its customer for the damage, then try to recover its payment from the person who caused the damage. However, a condominium association policy specifically states that the company waives its right to recover from a unit owner. It still has the right to seek recovery from a person who is not a unit owner and is responsible for the damage.
Although comprehensive, the association’s policy is no substitute for a unit owner’s own insurance. Work with our professional insurance agents to ensure that you have the proper coverage.