Condos & Co-ops

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Insuring a condo or co-op is a little different than insuring a typical home because you don't own the entire building. There are typically two policies involved: the master policy provided by the condo association or co-op board, and your individual policy, which is typically written on a standard form HO-6. If you know what is covered by the master policy, and purchase individual coverage for the rest, then you should have the protection you need.

The master policy
The common areas you share with other tenants should be covered by a master policy owned by the property. These areas include, the roof, stairways, elevators and basements. The master policy should protect the policyholder(s) from liability and physical damage. The master policy may also cover individual units as they were originally built, and may or may not cover fixtures. It is important for you to know exactly what the master policy covers so that you can purchase appropriate individual coverage for your unit and its contents. For instance, the master policy may cover original fixtures, but not improvements. If you or a former tenant has made improvements, you will want to be sure they are covered under your individual policy. The condo association or co-op board should be able to supply you with the information you need, or provide you with the appropriate documents that explain the coverage.

Your personal policy
Typically, your personal condo or co-op coverage will be written on Form HO-6. While the liability coverage on Form HO-6 is similar to that found in other homeowner's policies, the property coverage is different. Form HO-6 covers your personal property, and other property such as improvements, additions, private balconies, private entranceways, private garages, and other property that is your insurance responsibility under the condo or co-op documents. However, the policy only covers physical damage to property if it is caused by a "named peril" identified in the policy. Those include fire, lightning, storm, explosion, riot, aircraft, smoke, vandalism, theft, broken glass and volcanic eruption to name a few. Review the perils covered by your policy and remember, you always have the option to purchase coverage to protect you against additional perils.

Things not covered on the typical policy
If your policy is written on Form HO-6, your possessions are not covered for property damage resulting from perils listed in the "exclusions" section of your policy. These can typically include damage due to enforcement of building codes, earthquakes, flooding, power failures, neglect, war, nuclear hazard or intentional acts.

Loss Assessment
If your personal policy is written on Form HO-6, pay particular attention to the paragraph entitled "Loss Assessment." This paragraph entitles you to collect up to $1,000 for loss assessments charged to you by the condo or co-op association. Loss assessments typically result from losses suffered by the condominium or co-op as a whole, such as damage to a roof. These damages are then passed through to all unit owners.

Loss Settlement
Your policy will also specify what amounts you can recover in the event of a loss. In the case of property such as fixtures, balconies, improvements and certain other such items, you are entitled to receive the actual repair or replacement cost if the damage is repaired or replaced within a reasonable time. If the damage is not repaired or replaced, you may only receive the actual cash value of the property. As for your own personal property, you are entitled to receive the actual cash value of any damaged property, but no greater than the repair or replacement cost of the property. Loss settlement is always subject to the coverage limits described in your policy.

In order to qualify for payment from your insurance company, you must meet the conditions that are spelled out in your homeowners policy. Some conditions dictate your responsibilities before a loss occurs, and some dictate the actions you must take after the loss to remain eligible for coverage. Reading your policy carefully to familiarize yourself with your responsibilities under the policy is always advisable and can speed things along should a loss occur.

Where loss is covered under master policy and personal policy
Form HO-6 has a unique feature. When a loss is covered by both the condominium's or co-op's master insurance policy and your individual policy, your homeowners insurance will pay only for the balance of the loss that remains after the master insurance policy pays 100 percent of its limit.