According to the Insurance Information Institute, insurance claims were filed by 51% of the people with homeowners insurance in 2019. Of those, 97.2% were for property damage and theft. The remaining 2.8% of claims are for liability.

Combine those statistics with the fact that more than 5 million U.S. households are living in condominiums or cooperatives. That leaves a lot of potential claims against condo association insurance coverage policies…or does it?

Condo association insurance coverage is complete using two different plans. The initial coverage is a master policy the condo association management purchases. The second part is a homeowner's policy the resident purchases.

If you are managing a condominium complex, it is important to know what insurance you need. The goal is to protect against lawsuits and property loss within the complex.

Read our guide for answers on the liability requirements of the condominium complex, board members, and residents.

What Is Condominium Master Insurance?

As a condominium owner, you have dual ownership. You own a single-family unit that is your home, plus you are part-owner of “limited common elements.” These are areas of the condominium complex used by all members of the unit and/or the public.

This includes building exteriors, roads, lawns, elevators, and walkways. The complex may also have public recreational facilities you share. Areas like a pool, tennis courts, community room, and more are areas the master insurance policy covers.

There are portions of the property only in use by the individual unit occupants. Some of these need coverage under the "common elements" definition. This includes areas such as balconies, patios, parking lots, and garages.

The limited common elements of the complex must have a master insurance policy. The policy protects the complex against loss and liability and specifies areas of coverage for the structure and common areas.

Liability Coverage

The condo association’s liability insurance policy provides coverage for common areas of the complex. If anyone suffers an accident or injury, that falls under this insurance coverage.

The condo association may be liable if a person suffers injury using a common area. An example is a person using the walkway in a community building who experiences a slip and fall. The condo association may find itself the defendant in a personal injury negligence claim.

Property Coverage

A policy that specifies “bare walls coverage” includes protection for the building structure. This includes the roof, floors, walls, and elevators.

Single entity coverage protects individual units. This coverage applies to things such as bare walls, ceilings, and floors.

The unit owner handles insurance covering improvements to the unit. This includes upgrades or replacement of countertops, light fixtures, or floors. Verify what areas of units have coverage under the association policy by reading it carefully.

General Liability

Liability is one of the most critical areas of a policy. It protects the complex in the event of a lawsuit due to personal injury

This includes resident injuries within the limited common elements areas. It also covers claims by contract workers doing repairs on the property.

Residents or visitors who suffer injuries because the area needs repairs may also file claims. This may be due to uneven walkways or a lack of railings near steps.

Officer’s and Director’s Liability

Members of a condominium board may be individually sued. The court may find them liable for decision-making errors resulting in injury.

For example, the board contracts for a new walkway ramp and fails to put in a compulsory hand railing. A person using the ramp suffers personal injury because of that omission. Each person on the decision-making committee may be the subject of a personal lawsuit.

Fidelity Liability

Fidelity liability protects in the event of theft, embezzlement, forgery, or fraud. This may be the action of a board member or employee. The insurance covers the loss the association suffers due to dishonesty.

Claims against fidelity liability coverage have specific requirements. The theft must be by an employee.

In the case of a condominium master policy, make sure the policy states that coverage includes association board members. Board members are volunteers are will not have coverage as an "employee.

The insurance company may deny the claim if they determine the board member or employee is high-risk. If you place a person with a history of theft in charge of financial transactions, you are not exercising proper discretion. The association is at fault for taking undue risk and the claim will not be paid.

The second requirement is that it must be an actual theft, not simply funds that are lost. The difference is an employee that commits an act with the intent of causing loss to the association. Funds that are lost due to negligent action, not intentional theft, are not covered.

Personal Property

This provides coverage for personal property belonging to the association. This may include furniture in common areas, recreational equipment, office equipment, and more.

Take a look around your complex and determine what items the association provides. Will replacing lost or damaged items place a financial burden on the association? Personal property insurance covers that loss.

Workers’ Compensation

This is an area where many condo associations make an error. They assume that with no employees there is no need for workers’ compensation insurance.

The reality is a court of law may hold the association liable for lost wages, medical expenses, and more. This can happen if a contract worker suffers injuries while working on the condo property.

The condo association has a fiduciary responsibility to protect uninsured contactors. It is the association’s responsibility to make sure all contractors have the proper insurance. This includes liability and workers’ compensation coverage.

It is important to get written verification before allowing them to work on the property. That doesn't always guarantee they have coverage when working.

Once you have the proof you request, there is no guarantee against the contactor canceling or not renewing the insurance. It is also possible the coverage expires before the work is complete.

Other areas of liability occur when the complex hires a worker who is a friend or relative of a board member. Often obtaining the proper chain of proof is side-stepped. This can lead to problems later if an injury happens.

Workers’ compensation also provides coverage for any employees of the condominium complex in case of injury. It is important with a condominium master policy to read the declarations. Make sure they include coverage of specific volunteers, such as board members.

If any uninsured contractors or employees suffer injuries, the workers’ compensation policy provides protection. This can save the association thousands of dollars in an award of medical expenses and lost wages from the court.

The Condo Owner Must Insure

Depending on the level of structural coverage of the master policy, the condo owner may need to purchase homeowners insurance. They may need to insure the walls, floor, ceiling, fixtures, and electronics. They will also need coverage for furniture, appliances, and personal belongings inside the unit.

Each condo owner is responsible for insurance on their personal belongings. A condo resident's homeowner's insurance needs to cover areas the master insurance policy does not protect.

This includes covering additional living spaces if they must temporarily move out for repairs. Each condo owner is responsible for insurance on their personal belongings.

The individual condo owner is responsible for personal liability insurance. This provides the resident with protection in the event legal claims are made by someone suffering bodily injury inside their unit.

Who Pays for Condo Association Insurance Coverage?

The residents of the condominium complex pay for the master insurance policy. Their portion of the premium is part of their monthly dues.

Residents have equal access to common areas. This makes them responsible for equally sharing the cost of insurance.

Master insurance policies have deductibles when filing a claim. The deductible amount is also spread among all condominium owners.

For example, a condo master policy has a $2,000 deductible. There are 20 condo owners, making each owner responsible for $100 of the deductible.

There are no exemptions for association board members because they volunteer. Board members are homeowners within the complex. As homeowners, they must pay their equal portion of insurance premiums.

At the closing of a condo sale, the resident receives a “certificate of insurance.” This shows what the condo association policy covers.

The certificate gives them information about insurance responsibility. It helps them understand the difference between what the association covers and what they need to buy.

Insurance Purchasing Mistakes

Many condominium associations purchase insurance without understanding what their policy covers. They also flip insurance from one company to another due to lower pricing, failing to compare whether they are getting the same coverage.

Many insurance policies appear to be the same at first glance. It is important to read and understand what each policy covers under every heading. Definitions, exclusions, terms, and language do vary between policies and companies.

To make sure the condo association has sufficient coverage at the best price, the board should undergo an insurance review once a year. If your board has not had an insurance review recently, or you think your coverage may need improvement, call your insurance company and request a review.

The agent will go over your current policies. They will make recommendations if there are changes that will improve your association's coverage. You need to request a review anytime you upgrade or expand your condominium units, grounds, or common areas.

Are Master Insurance Policies Mandatory?

Whether or not condo insurance coverage is mandatory depends on your state requirements. Even if not mandatory, the protection having a policy provides makes it well worth the additional expense to each resident’s monthly dues.

Get a Condo Association Insurance Quote

Make sure your condominium association has all the protection it needs before the need for a claim happens. It's too late to purchase coverage when you discover your insurance is lacking after filing a claim.

If you are wondering about the price of your condo association insurance coverage, get a quote from Hummel Group today. If you have any questions contact us by phone at 800-860-1060.

In 2021, over 97% of home insurance claims focused on some form of property damage. It's important to make sure the condo association and unit owners both have the right policies in place to cover these potential claims

Your condo must be protected by a Condo Master Policy. But how can you know if you have gotten the right policy?

Keep reading to discover everything you need to know about the condo master insurance policy.

What Is a Condo Master Policy?

A condo master policy gets chosen by the association of condo owners. This policy focuses on covering shared areas, including walls, hallways, and public relaxation areas.

Because a master policy focuses only on these shared spaces, individual condo owners must still take out their own independent coverage. But to get the right amount of coverage, it is important for each condo owner to know the exact details of their condo association master insurance policy.

Communication Is Key

You might be surprised at how often a condo unit owner does not know what is covered in the condo master policy. If they are unaware of what all is covered they may not get the right personal coverage either. This can leave coverage gaps.

Communication is key when it comes to condo association insurance. The association needs to communicate what the master policy covers and how the master policy helps to maintain the quality, safety, and beauty of the condo itself. And condo owners need to pose questions and concerns about the insurance to the association and keep an open mind about the role of this insurance.

It's important for everyone to remember that insurance protects us from threats that we never saw coming. With that in mind, let's dive into the specifics of the master policy that every condo owner should know and understand.

The Bare Walls-In Policy

One type of condo insurance is the "bare walls-in" policy. This type of coverage is limited to structural elements of the condo but does not cover the interior.

What does this mean? For example, a bare walls-in policy would cover issues with things like drywall, wiring, framing, piping, and roofing. Such coverage is important because damaged pipes can lead to floods and damaged wiring can lead to fires.

However, a bare walls-in policy does not cover any installations, fixtures, or appliances within a condo. Of course, when it comes to these elements inside a condo, they can be protected with a condo unit owner's individual insurance.

The All-In-One Policy

An all-in-one policy is very simple to understand. Basically, it covers everything that the bare walls-in policy covers. But it also covers what that policy did not, including the fixtures, installations, and built-in appliances.

An all-in-one policy is always a more robust form of insurance coverage than a bare walls-in policy. Of course, it always costs more as well. Because these costs get shared among condo owners, it's important for the association to get the coverage the condo needs without forcing everyone to pay too much for a policy they don't need.

Coverage of Common Areas

Earlier, we discussed how the condo master policy only covers shared spaces and common areas. Before we go any further, it's important to review how these spaces are defined in your own condo.

For example, such spaces include places like the parking lot, walkways, and assorted green areas outside of the buildings. But it also includes places like parks, pools, gyms, and any special event spaces.

The more these areas are used each day, the more likely they are to get damaged by anything from simple wear-and-tear to unexpected accidents. But a good condo association master insurance policy can help keep these areas protected in the event of an accident.

Understanding the Deductible

Every insurance policy has some kind of deductible. This deductible must be met first before the policy will cover anything. But how does the deductible work when it comes to condo association insurance?

If the condo association has to file a claim, then residents of the assorted condo units may have to pay a small portion to help meet the deductible. The condo association may also pay the deductible if they have been collecting money for this expense as part of regular fees. They can then pull from this fund at the time of the claim. In some cases, if the damage only affects one unit, that condo owner may have to pay the deductible.

There is a chance a person could spend years living at a condo and never have to pay their share of a deductible. But knowing what the deductible amount is can help condo unit owners prepare themselves in case they ever have to pay a large amount to the local condo association to help pay for the damage.

Getting Additional Coverage

So far, we have focused entirely on the condo master policy. However, since this policy only affected shared spaces, a condo unit owner will still need to take out separate condo insurance to protect their specific unit.

Before taking out independent insurance, a unit owner should make sure they understand how the master policy works. This may impact certain decisions, including what types of insurance they take out and what their coverage limits will be. And the possibility of having to pay a pro-rata deductible amount at any time may influence how much they're willing to pay for a monthly insurance premium.

There are many different factors to should consider before taking out a personal insurance policy for the condo. And the rest of our guide is going to walk unit owners through what some of the additional coverage is and why it may be important to unit owners and their families.

Understanding Liability Coverage

There is a chance that the condo master policy includes some form of liability coverage. However, that coverage is likely limited to common areas. For example, covering if somebody gets hurt while using the condo's swimming pool.

Unit owners should strongly consider adding liability insurance to their personal policy. This insurance helps to protect policyholders in the event that someone gets injured in their home. And liability insurance is far more important than one may realize!

If someone gets injured in your condo and they believe it is your fault, they can sue you over the matter. Even if you are eventually found innocent, the legal fees of going to a trial are too much for most people. This is why most of these claims are settled out of court.

But even the settlements aren't cheap. In fact, the average settlement amount for personal injury cases is a whopping $52,900!

Liability coverage helps to pay for the medical bills of the injured party. And if a case goes to trial, or if you need to settle, this insurance will pay for that as well. Ultimately, this is a far better alternative than going into major debt over a simple accident!

Cash Value or Replacement Coverage

When picking personal condo insurance, one must decide between policies that offer cash value and policies that offer replacement coverage. But what is the difference between these policies, and which one is better?

Basically, replacement coverage is just that. If something is destroyed or stolen (like your television), then the insurance carrier will pay to replace it with either the same model or an equivalent model.

Cash value coverage means that you will receive an amount equal to the current value of the destroyed or stolen item. "Current value" means that the insurance carrier will consider how old the item is and how its value has depreciated.

When it comes to protecting your property, replacement coverage is always better. But it is always more expensive as well, so you must find a balance between what you wish to protect and how much you wish to pay.

Do You Need Flood Coverage?

We've all seen terrifying news coverage of entire buildings being damaged or destroyed by floods. So when it comes to protecting your condo, you may be asking the big question: "do I need to add flood coverage?"

If your condo is located in a high-risk flood zone, then such insurance will be mandatory. Otherwise, flood insurance is a separate policy that you can get from your carrier on top of your personal condo insurance.

The government uses existing data to determine if an area is likely to flood. But weather patterns and climate change causes unexpected effects, including flooding in unexpected areas, you may want this coverage to achieve peace of mind.

Get the Insurance You Need Today!

Now you know more about the condo master policy. But do you know where to purchase a condo master insurance policy? Or as a unit owner where to purchase a personal condo policy?

Here at Hummel Group, we specialize in protecting both you personally and your condo association. We have both a personal risk team and a team of condo association specialists that can help get your property insured. To discover how we can best protect the most important things in your life, all you have to do is contact us today!