you own a condominium, you know that you alone own a certain
portion of the condominium premises. In this respect, you
have a sole interest in a clearly designated piece of property.
You, along with the other members of the condominium association,
have a group or undivided interest in other parts of the condominium
you own a condo or co-op, you depend on two insurance policies
for protection: your own coverage and the insurance purchased
by the condominium or co-op board for the common areas of
the property that you share with the other owners, like the
roof, basement, elevator, boiler and walkways.
before shopping for your own coverage, you must determine
where your responsibilities end and those of the condo or
co-op association begin.
the association is responsible for insuring the individual
condo or co-op units as they were built, including standard
fixtures (the bathtub, for example). The individual unit owner
is responsible for any alterations to the original structure
of the apartment, like the addition of a bathroom or the remodeling
of a kitchen. Typically, this includes not just alterations
you made yourself, but those made by previous owners too.
in other cases, the condo or co-op association is responsible
only for insuring a unit up to its bare walls, floor and ceiling.
The owner must insure kitchen cabinets, built-in appliances,
plumbing, wiring, bathroom fixtures, and so on.
only way to determine what you have to insure yourself is
to read your association’s bylaws and/or proprietary
lease (and get an explanation for anything you don’t
understand). That should be your first step.
Coverages for Condos and Co-ops
and Co-op insurance provides all the standard homeowners coverages
- property, liability, additional living expenses, improvements,
and co-op policies provide some of these coverages for higher
limits than the renters policy does. For example, the typical
condo and co-op policy will cover additional living expenses
for 40 percent of the amount of insurance on your belongings,
and improvements and betterments up to 20 percent of the amount
on belongings - about twice as much as renters policies usually
give. And you can buy higher limits if you need them.
and co-op policies also provide loss assessment insurance,
a coverage that isn’t needed by homeowners and renters.
Is Loss Assessment Coverage?
elderly man visiting your building on a hot day in August
steps into the elevator, which gets stuck between floors.
He’s trapped for several hours. Neither the air-conditioning
nor the elevator alarm bell is working. Nobody hears his call
because it’s the middle of the day and everyone who
lives in the building is either at work or on vacation. The
man has a stroke. His children successfully sue the condominium
association for $2 million, saying the board ignored repeated
complaints from residents that the elevator wasn’t being
association’s insurance policy provides liability coverage
for only $1 million. That means that you and the other unit
owners will be assessed for the additional $1 million. This
is the point at which you’ll turn to the loss assessment
coverage in your own policy.
assessment coverage is usually limited to $1000, but can be
purchased for up to $50,000. Regardless of the limit, loss
assessment coverage will respond only when assessments are
made to meet a peril that is covered, but underinsured, in
your building’s policy. Thus, coverage would pay for
the liability assessment or for an assessment to help pay
the deductible in the building’s policy. But it’s
not going to cover an assessment to hire a second doorman
or to refurbish the lobby, for instance.
Versus Market Value
a condominium or co-op owner, you live in a building whose
coverage against fire and all the other perils insured against
in a homeowners policy is bought by the association, not the
individual unit owners.
and co-op owners are sometimes troubled by the fact that the
building’s insurance coverage doesn’t reflect
the market value of the individual co-op or condo units. This
is because the building is covered for replacement value,
which doesn’t include land value, air rights, or the
laws of supply and demand in a hot real estate market.
you live in a building that would cost $5 million to rebuild,
your condo or co-op association won’t be able to buy
a policy for more than that amount - even if there are 45
apartments in the building and each has a market value of
$300,000 for a grand total of $13.5 million!
way to put this is that the building’s insurance company
is covering the roof over your head, not the value of your
investment in real estate.
You Shop for Coverage
with all types of insurance, you should get several quotes
on tenants, condo or co-op coverage. The rate you pay will
depend on the same factors that influence the cost of homeowners
coverage: the structure of the building you live in, the quality
of fire and police protection, the insurance company’s
loss experience in the neighborhood you live in. Prices vary
from one company to another and comparison shopping will get
you the best coverage for the lowest cost.
comparison shopping, ask each company representative:
How much the policy provides for additional living expenses
or loss of use coverage and whether you can buy a higher limit
if you want to. (You might want to do this if your normal
living expenses are much lower than what you’d pay to
live in a hotel or rent another apartment in your area.)
How the size of a deductible will affect your premium. Remember
that, as with all coverages, the higher your deductible, the
less the coverage will cost.
How much additional premium it will cost to cover your belongings
for their full replacement value instead of actual cash value.
What the policy limits are for jewelry, furs, and any other
What discounts you might qualify for. Many companies reduce
their premium charges on tenants insurance when the policyholder
has installed burglar alarms and smoke detectors, just as
they do for homeowners.
buying coverage, make a list of possessions especially important
to you and ask the representative if the policy insures them
all for their full replacement value. You should also ask
about any business furnishings or equipment you use at home.
A personal computer that you use for work at home, for example,
may not be covered for its full value.
note that the precise coverage afforded is subject to the
terms, conditions, and exclusions of the policy as issued.
This explanation is intended only as a guideline. This information
is not intended to be considered investment, tax or legal
advice. It is provided, for your education only. This is not
an insurance contract. All terms and coverages are defined
solely by your policy.
more details, please call a PaulBalep representative toll-free
1-800-964-8614 to receive a free, no-obligation
quote. Like so many satisfied clients, we think you’ll
be happy you did. And to set up a meeting to discuss additional
insurance and financial goals: Visit us online at www.paulbalep.com,
or e-mail us at email@example.com.
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