Sometimes insurance and the terms that accompany it can feel like a completely foreign language. It can be mystifying and overwhelming, whether for individual condo residents or the board members who oversee the community as a whole. The insurance industry uses a tremendous amount of shorthand, and the degree of coverage has seemingly grown exponentially in the last couple decades. With lawsuits and other forms of legal recourse now just a common reality of life in condos and HOAs, board members and property managers need to be diligent about what kind of insurance coverage they have and require.
Knowing and understanding the key terms and concepts behind complete, well-designed insurance coverage can go a long way toward peace of mind and making sure that should the worst happen, homes and assets are protected.
Common Terms & Concepts
For typical homeowners and condo unit owners alike, the HO-6 form is one of the more essential forms of insurance. It covers the contents and interior elements of a condo unit versus the exterior of the building and its landscaping features, which are insured by the homeowners’ association through its master policy. The HO-6 policy covers personal belongings and the condo space itself from the traditional risks such as burglary and fire. “Fire and water are the two most prevalent. They account for 90% to 95% of all losses in any type of habitational setting,” says Paul Kaliades, president of Renters Legal Liability, a Dobbs Ferry, New York company which serves New Jersey. “So, in keeping with the tenor of the basic HO-6 owner's policy, we cover everything from the inside four walls of that condo, and if anything occurs under the five perils that we cover, our program kicks in,” he says.
The relationship between individual unit owner policies, and multifamily coverage can create the most confusion among condo and co-op dwellers. “Very often, unit owners don't understand that, particularly in a co-op, that if there's a loss, let's say a water damage loss, that the damage to their contents or whatever they have provided in the way of improvements and betterments such as putting a new floor in, putting up a new wall, those things are not the responsibility of the co-op association or condo association. They're the responsibility of the individual unit owner,” says Herbert Gelbart, president of Westchester-based InSmart National, which serves New Jersey.
According to State Farm, loss assessment coverage is uniquely designed for co-op or condo owners, providing protection in the event that owners must pay a share of a significant assessment. For example, should an individual be seriously injured on common property and the courts award a judgment that is higher than the amount of liability coverage provided by the condo’s or association’s policy, then the loss assessment coverage will cover the unit owner’s share.