What Kind of Insurance Do I Need for My Condo Building?
March 20, 2008 No CommentsTrustees of condominium associations have a daunting task in securing insurance coverage for the association’s property and liability. While a primary concern is providing coverage at a price that is affordable to the unit owners, it is imperative to gain a basic understanding of the policy types and endorsements available for associations.
What types of Condo Master Insurance coverage are available?
A condo association has the option to obtain coverage on an “all-in” or “studs out” basis. All in coverage is more comprehensive and studs out is more limiting in its scope of coverage. When deciding which type of policy is best for your association, it may be helpful to review the condo bylaws to determine the exact requirements of the association.
• Studs Out Policy
A studs out policy is designed to provide coverage solely for the common areas of a condo building. The interior common areas and exterior of the building are covered and the interior of each unit is excluded. Unit owners must obtain their own coverage for the interior structure of their unit.
• All-In Policy
An all in policy provides coverage for the common areas of a condo building such as the interior common areas and exterior of the building. It also provides coverage to the structural interior components of each unit at the time of purchase and their improvements.
How are claims paid when a loss occurs?
Most policies are written on a “replacement cost” basis. This requires the insurance company to pay to rebuild the damaged or destroyed property at the current replacement value. Another way to insure a building is on an “actual cash value” basis, or ACV. This coverage pays for the value of a building, less depreciation.
As a trustee of an association, it is imperative that you seek out an insurance policy that pays claims on a replacement cost basis.
Make Information Available to All
Now that you have selected the appropriate policy to serve the best interest of the unit owners, the final step is to inform everyone the scope of coverage available to them. Make it clear as to the owners what level of coverage exists for their unit and on what basis a claim will be paid. With that information, unit owners can determine what level of coverage, if any, they need to purchase individually.
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