What type of insurance do I need for a co-op or condo?
Most of the condo and co-op owners assume that the insurance for them and their condominiums are covered in the association fees itself. However, that is a terrible misconception. There is specially designed policy of insurance for all the condo/co-op owners. In order to safely insure your condo or co-op, call your broker or agent and tell them you need a policy for your new condo. With some companies, this is referred to as an HO-6. Other companies call it something proprietary. Regardless, it covers you for the contents of your condo and through a special endorsement called additions and alterations, you can cover the beautiful cabinets, countertops and that Viking range you plan to put in. The basic policy only provides very limited coverage for this, so be sure to figure out how much it would cost to replace everything attached to the walls, then add 20% for good measure. Additionally, there is a seldom mentioned coverage called Loss Assessment and here's an example to help you understand. Let's say that a visitor to the complex drowns in the pool. You think the condo association has coverage and it probably does. But, what happens when the amount awarded by the court exceeds the amount of liability coverage that the association carries? You guessed it... an Assessment letter goes out to each of the owners since they are jointly liable. So, let's use round numbers and say the association carries 2 million in coverage and there are 100 unit owners. The courts award the family $4 million dollars. The additional $2 million is divided amongst the owners who all owe $200k a piece. Who ya gonna call??? Your agent of course. And hopefully after reading this, he will tell you- "no problem, you've got loss assessment coverage and I'll process the claim now".
Additionally, the condo association will maintain a policy commonly referred to as he “master policy”. This policy covers the common areas in the building such as elevators, roof, basement, boilers and common walkways shared by other owners for physical damage and liability. Occasionally the condo/co-op board is accountable for insuring the individual condo/co-op units as built originally. In such scenario, the condo/co-op owner is required to cover their personal possessions and the modifications made to the original structure. However at times, the condo/co-op association insures only the bare walls, ceiling and the floor. The condo/co-op owner must then insure all the cabinets, bathroom fixtures, built-in appliances present inside their unit in addition to their personal belongings. You have every right to see a copy of this policy before buying a unit since there is a definite possibility that you will one day be referring to this policy.
When buying an insurance policy, search for the companies that specialize in condominiums or co-ops. It is important to read carefully the association bylaws and/or the proprietary lease agreement to clearly understand which of the structural components which are and which are not covered by the condo/co-op board to ensure adequate coverage. The special insurance policy for condo/co-op owners provides financial protection against any loss or destruction to their possessions. Therefore getting your condo/co-op insured is a decision sure to benefit you in the long run.
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