Some “Ins and Outs” of condo insurance

So you have a unit in a condo association, and part of your monthly (or quarterly) condo fee goes for insurance — so your troubles are over, right?

Well … not so much (and most of you know this), because the condo insurance doesn’t cover the inside of your unit. You have to purchase your own policy for your interior and contents.

What most folks don’t know is the “Ins and Outs” of that insurance and what to expect in case there is a loss, so let’s fix that. Spending a few minutes asking a few extra questions of your insurance agent and making sure you know what you’re getting is better than finding out the hard way, right?

Assume for a moment that the entire condo building is destroyed by fire. The insurance policy maintained by the condo assocoiation (the Master Policy) will pay to rebuild the building … to a certain point. That point is “an empty box,” meaning bare walls and concrete floors, with plumbing and electrical service to your unit within the box — but that’s it. No interior walls dividing up the living space, no fixtures of any kind (plumbing, electrical, or otherwise), no kitchens or bathrooms, no floor covering. All of that stuff is what you are responsible for, and for that, you buy insurance.

This basic policy needs to provide, at minimum, $50-$65 per square foot of living area for the reconstruction of the interior of your unit; this is called  the “Additions and Alterations” portion of your policy. This is the bare minimum; consider a higher amount or you could be left dissatisfied with less “condo” when the rebuild is done.

The other major area of risk for you is “Personal Property:” your clothing, appliances, TVs, and so on, and this is a separate area of coverage. Understand that this is a separate area of coverage with its own limits on maximum payout. And as with any homeowners’ policy, if you own fine art, jewelry or furs of high value, you’ll want those covered by a separate  “rider” to your policy.

Of course, not every loss is a total loss of the building; there are lots of areas short of total destruction covered by the policy; here are a few to pay attention to:

• Loss Assessment. If the condo association sustains a loss covered under the Master Policy, and there are any expenses not covered entirely by the policy, the Association will come up with the money to pay these expenses by way of a Special Assessment, divided among the owners according to the provisions of the condominium documents. Most homeowner’s policies will cover these types of special assessments up to $1,000. Increase this limit to the maximum available — probably $3,000 or $5,000.
  
• Mold. You don’t have to have water damage to have a mold problem; in fact, 3 days or so of no air conditioning  (as in a power outage) can be enough for mold to appear. Mold remediation can be expensive! Some insurance companies exclude mold altogether, others cap coverage at $10,000. Increase this to the maximum available, usually $50,000.
  
• Ordinance of Law. Sometimes laws or codes change that make it more expensive to rebuild (the original building didn’t have to have the new requirements, like hurricane glass). Most insurance companies cover up to 10% of the building limit. Increase this to the maximum available — 25% or more.
  
• Back up of sewers and drains. This is often underappreciated by homeowners, but debris from a major storm can clog sewer systems and cause untreated waste to back up inside your home. $5,000 in coverage probably won’t cost more than $25 per year — make sure you get this coverage.

As a homeowner, these are a few of the questions to ask; your agent should be able to guide you in understanding what you should have and what you don’t need.