It is never a pleasant experience to find yourself in a position where your home and personal items are destroyed by fire, water or some other cause.
A few days ago, there was a fairly significant fire in Norwalk, CT at a condo complex that resulted in more than 50 displaced individuals and families. The Norwalk Condo Fire reminds us all that even though in Connecticut it is likely that the association has a master policy that covers the interior of your unit, including improvements and betterments, there are still many very good reasons to obtain a Unit Owners Policy.
Condo Homeowners Insurance Coverage
1) Personal Property Coverage for all of your “Stuff.” The association’s master policy won’t cover it, so somebody has to…and surprise, it’s you. The pitfall here is underestimating what you own. In my experience, everyone underestimates. You need to consider the cost of everything…clothing, furniture, electronics & media, books, kitchen items, and every little think you own at the cost to buy today. Brand new. Even a minimalist would be surprised (Probably appalled) by how much they own. Wardrobes alone can be more significant than the minimum policy limit often requested.
2) Loss of Use or Rent Coverage. This is a big one. If your unit burns up in a fire or is water logged in the process of dousing a fire you will need to temporarily live elsewhere. That could mean months or even a year of additional rent expense. Somebody has to pay for this cost while you continue to pay your mortgage. Might as well be the insurance company. Your coverage limit should be comparable to the annualize cost to rent a similar unit. If you pay a market rate of similar size unit is $2k per year, you need at least $24k in coverage. I say “at least” because you also should consider all additional costs you may endure that are above your normal day to day expenses. “Loss of Use” covers it normally. That said, you should probably increase your limit further. Build in a buffer. The limit will vary and should be discussed with your agent.
3) Liability Coverage. Did you know that your worldwide liability coverage comes from either a home, condo or renters’ insurance policy? Yeah, it does. And you need it. More importantly, the limit should be as high as you can get. Consider this, if your negligence caused the fire that gutted the complex, insurance carriers for the other unit owners and the master policy will be lining up to subrogate against you. I’d recommend in this case to go as high as possible in the Condo Homeowners Insurance Policy, and also purchase an umbrella policy to expand your limits. It’s cheap. Figure $200 per million for the umbrella.
4) Loss Assessment Coverage. Often the insurance for a condo associations master policy can fall short of the coverage limit needed to complete a restoration or rebuild common areas. When that happens, the association can assess the unit owners for their portion of the shortfall. We strongly recommend also considering a limit that as high as affordable. $10k or more can usually be purchased at very little extra cost.
5) Additions & Alterations Coverage. Connecticut Condo associations with less than 12 units are not subject to the CT mandate requiring the inclusion of unit-owner’s improvements and betterments within the association master policy. Associations above 12 units can also bypass the requirement if they follow some specific guidelines for notifying unit owners annually of what is not covered by the master policy.
Finally, some associations are mismanaged and their insurance policies are in conflict with their bylaws. That said, if any of the latter two situations exist, you need to account for the rebuild of the entire interior of your unit. (In NY, ALL condo policies must account for the interior costs.)
To be safe, I would recommend that you consider purchasing condo owners insurance coverage to account for construction costs from the studs in. If you own a unit with a master policy that accounts for the interior, your A&A risk is limited to the deductible on the master policy. Also, check the association bylaws and obtain a limit equal to the highest allowable deductible in the bylaws. This will protect you from a change in the master policy deductible.
Condo Homeowners Insurance policies are critical and so many consider them pointless or of no value. Try telling that to the displaced families in Norwalk. Lastly, having a policy doesn’t mean you are safe. You need the proper coverage first. Proper coverage ensures that a claim should be paid. Finding a carrier with great claims handling ensures that your claim is paid and handled efficiently.
Using a great agent that can then find the most cost-efficient option to accomplish your goal is the final step in being properly insured. To find out more about insurance for condos, contact us at 203-655-6974. There is a lot I left out and more to learn about the value of a condo unit owner’s policy. Let me or my staff educate you!