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CAROLE RICHELIEU
Understanding Condo Insurance What condominium boards and owners need to know about insuring their property policies can either be a condominium homeowner’s policy covering a unit that an insured resides in, or a condominium rental unit policy that an insured may rent out.
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Condominium association policies:
This is the first article of a two-part series on condominium policies. In this part, we outline the four main types of policies that apply to most condominium associations. In next month’s article, we will discuss how these types of policies and their coverages collectively apply when a condominium building loss occurs and explain why cooperation and coordination by the association, unit owners, and their carriers are key to having claims run smoothly and efficiently in order to return damaged building property back to pre-loss conditions.
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awaii residential communities are composed of numerous condominium associations and the state is seeing the development of many newer condominium projects which are expected to be completed within the next few years. Whether you are a condominium association board member, individual unit owner or renter, obtaining appropriate insurance is important to protect you financially from losses.
What are the types of condominium policies and what do they cover? Condominium unit insurance for individual units is not required by law in Hawaii. However, a mortgage company may require that an owner hold insurance on the condominium unit for the duration of the loan. The governing documents of the condominium association may also require that individual unit owners procure insurance that specifically covers their residential unit, or rental operations of the unit if the unit is leased out to other parties, for losses not covered under the condominium association policy. In general, the condominium association policy, commonly referred to as the “master policy, ”covers the building structure, common areas, and original “as built” individual unit construction versus an individual condominium unit policy that covers “as built” building property, building improvements, and personal property of the unit owner. Individual condominium unit owner
Building Coverage • Covers building property damage due to direct physical loss or specific perils to the structure, common areas, and usually the original “as built” individual unit building construction. • Provisions include duties to mitigate damages and promptly notify the carrier of a loss that may be covered by insurance. • Most policies deem the condominium association building coverage primary over individual unit owner policies for insurance covering the same loss. • Most condominium associations carry large deductibles that may be assessed against unit owners after a covered building loss occurs and after the master policy claim is filed. • Condominium association policies will cover building damage as defined under the policies due to direct physical loss or named perils regardless of the loss origin subject to applicable exclusions. • Establishing liability on the condominium association or individual unit owners is not necessary to invoke building damage coverage under the master policy. The cause of loss and resulting damage need only meet the insuring agreements of the master policy in order to extend the master policy building coverage. Business Personal Property Damage
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