Condominium associations have unique insurance needs since each unit owner owns a portion of the entire association.
Whether a 100-unit high-rise or a small association with 10 units, condominium associations need very specialized insurance protection. Let us help you decide what your association needs!
Condominium Master Policy
Condominium master policies protect the association and its individual unit owners from losses to the association’s buildings or other structures on the premises, such as clubhouses, gyms, as well as the association’s office. Parking lots, walkways, and green areas are also included in shared spaces. Typical coverages that are available on most master condo insurance policies include but are not limited to:
- General Liability: Covers the condo association from liabilities arising from a guest injuring themselves on the property or a guests’ property getting damaged on the premises.
- Property: Covers the common areas of your condo building, including the roof, basement, and building equipment such as boiler and machinery.
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Property Insurance
Risk Factor
Condo and co-op associations may face severe financial consequences from property loss due to fire, wind, or other causes.
Solution
Commercial property insurance should provide coverage for damage to the building, personal property owned by the association, and income lost due to a covered cause of loss.
General Liability
Risk Factor
Condo and co-op associations are susceptible to many risks, such as claims due to bodily injury, property damage, personal injury, and more. The association could also face lawsuits from claims associated with common areas such as hallways, stairwells, swimming pools, and parking areas.
Solution
General liability insurance is an absolute necessity for any association. It provides coverage for legal fees and judgments when the association is named in a covered lawsuit.
Crime and Fidelity Bond Insurance
Risk Factor
Crime and fidelity bond insurance is designed to provide coverage to cooperative and condominium associations to protect them from theft of funds or association-owned personal property by an employee, board member and in some cases, the property management firm.
Solution
Crime and fidelity coverage is designed to provide coverage for employee dishonesty, forgery and alteration, computer fraud, counterfeiting, and more.
Systems Breakdown Insurance
Risk Factor
With technology performing many tasks in today's world, a breakdown can cause a significant financial burden, including the cost to repair the equipment and any resulting lost income or extra expenses.
Solution
Comprehensive coverage provides protection against equipment mechanical breakdown for machinery such as heating and cooling equipment and elevator motors.
Directors and Officers Liability Insurance
Risk Factor
Directors and officers (such as board members) can be held accountable for decisions they make in the performance of their duties. Any resulting lawsuits are typically expensive to defend and can result in potentially large settlements.
Solution
Directors and officers liability insurance provides coverage for the legal costs to defend a covered lawsuit and may also provide the money necessary for any resulting judgments.
Commercial Umbrella Insurance
Risk Factor
What happens when your condo or co-op building faces a large liability loss that exceeds the basic limit of your standard policy?
Solution
A commercial umbrella policy will provide extra coverage over and above general liability, directors and officers liability, auto liability, and employers liability policies. Limits start at $1,000,000 and go as high as $200,000,000.
Cyber Liability Insurance
Risk Factor
Technology has spun a whole new web of liability exposures including the need for protection of privacy, data, and financial information for your association residents. Breach of their data can result in costly fees and lawsuits for the association if held liable.
Solution
Cyber liability coverage covers fees and lawsuits resulting from the breach of personal data, assuming that the association is liable.
Environmental Insurance
Risk Factor
Pollutant clean-up is generally excluded from the basic policies. Leaking of a fuel tank can be very costly to remediate.
Solution
Environmental insurance provides coverage for clean-up costs and third party lawsuits as a result of a leak from the tank or related pipes.
Sponsor / Investors Owned Units Insurance
Risk Factor
Typically the policies for the association exclude coverage for the sponsor or holder of unsold shares for the interior of the units they own.
Solution
A policy should be maintained to provide coverage for what you are responsible for within the unit, as well as any lost income and lawsuits resulting from acts within the unit.
Optional coverages can protect your building even further.
While there are dozens of add-on coverages that you might consider, here are a few:
- Directors & Officers: Protects the directors and officers of your association in the event they are sued in conjunction with their performance as association members.
- Employee Dishonesty: Protects an employee or trustee from embezzling funds from the condo association.
- Flood Coverage: Floods are not typically covered by a master condo policy. In most cases, a separate flood insurance policy should be acquired to obtain protection from flood damage.
- Earthquake Coverage: Similar to flood coverage, earthquake coverage is not often included in standard policies. Earthquake coverage will cover damage to your building in the event of an earthquake.
The structure of the insurance policy is important.
It should detail where the condo association ends, and the unit ownership begins within the structure of the building. Generally, there are two types of insurance that most associations have:
- All-In: An ‘All-In’ policy instead includes the building plus fixtures and installations and may include coverage of built-in appliances that come with the unit. This is the common Condominium Association Insurance form in CT as the Common Interest Ownership Act requires it.
- Bare Walls: A ‘Bare Walls’ policy focuses on the actual structure of the condo, from the exterior to the roofing to the wiring, framing, piping insulation, and the drywall itself. It does not cover the interior of the home, such as the fixtures, installations, and appliances. Coverage of these items is the unit owner’s responsibility. This is less common and only used in very specific circumstances.
Making sure, as an association, that your master policy is clear isn’t only vital for the association, but also to the current and new unit owners.
No two condo associations have the same coverage needs. With so many details and options to consider, The Reardon Agency can adequately assess your needs and match your association’s requirements with the appropriate carriers and policies.
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