Understanding Condo Association Master Insurance Policy

Condominium associations, also known as HOAs (Homeowners Associations), are in charge of maintaining and insuring the common areas of a condominium development, as well as protecting unit owners from potential risks. Therefore, condo associations typically purchase a master insurance policy to provide coverage for the entire complex. This article aims to provide a comprehensive guide on condo association master insurance policy, including its types, coverage, and exclusions.

Types of Condo Association Master Insurance Policy

There are two main types of condo association master insurance policy: all-inclusive and bare walls. The type of policy purchased by the association affects the extent of coverage provided to unit owners. Let us explore each type in detail.

All-Inclusive Policy

An all-inclusive policy, also known as the “single-unit policy,” covers both the interior and exterior of units, as well as the common areas. With this type of policy, the condo association is responsible for all repairs and restoration in the event of damage or loss. Since it provides more comprehensive coverage, an all-inclusive policy generally has a higher premium than a bare walls policy.

One of the benefits of an all-inclusive policy is that it eliminates any gaps in insurance coverage between the condo association and individual unit owners. Since the association’s policy covers everything, it reduces the likelihood of disputes arising over who is responsible for repair expenses. Additionally, the policy provides coverage for fixtures and improvements made by unit owners.

On the downside, an all-inclusive policy can make it difficult for unit owners to obtain their own insurance. Since their personal insurance only needs to cover their personal property and any additions or alterations made to their unit, an all-inclusive policy may lead to over-insurance.

Bare Walls Policy

A bare walls policy only covers the structure of the building, from the exterior walls to the roof, but does not include any interior fixtures, finishes, or improvements. Unit owners are responsible for insuring the interior of their units, including any upgrades, appliances, or personal property.

While a bare walls policy has a lower premium, it may result in coverage gaps between the association’s policy and the unit owner’s insurance. For instance, if a pipe bursts in a unit and causes water damage to nearby units, the bare walls policy only covers repairs to the structure of the building, leaving individual unit owners to cover the cost of repairing their own units.

On the other hand, a bare walls policy allows unit owners to choose their own insurance policy that best suits their needs and budget. They can tailor their coverage to their personal property, liability, or loss of use.

What Does a Condo Association Master Insurance Policy Cover?

A condo association master insurance policy provides coverage for damage or loss resulting from named perils, such as fire, theft, windstorm, hail, vandalism, and other natural disasters. The coverage typically includes:

What Is Excluded from a Condo Association Master Insurance Policy?

A condo association master insurance policy typically excludes the following:

FAQs

What is the difference between a condo association master insurance policy and individual unit owner’s insurance?

A condo association master insurance policy covers the common areas and the structure of the building, while individual unit owner’s insurance covers their personal belongings and any upgrades or improvements made to their unit.

Can individual unit owners purchase their own insurance policy?

Yes, unit owners can purchase their own insurance policy to cover their personal property and any upgrades or improvements they made to their unit. However, they should review the association’s master insurance policy to avoid any coverage gaps.

Who is responsible for the deductible in the event of a claim?

The condominium association is responsible for the deductible in the event of a claim. However, the association may choose to pass on a portion of the deductible to unit owners if the cause of the claim is attributable to a specific unit or owner.

How often should a condo association review their master insurance policy?

A condo association should review their master insurance policy annually to ensure that it provides adequate coverage and is up-to-date with any changes in the complex or regulatory requirements.

Can a condo association change their master insurance policy mid-term?

Yes, a condo association can change their master insurance policy mid-term if they find a better policy or need to adjust their coverage. However, they should consult with their insurance agent or attorney before making any changes.