Condo Association Insurance

Condominium owners’ associations have unique insurance needs. Each unit owner owns a portion of the building where they live, while common areas and certain portions of the building are shared. Like all other types of homes, condos face property disasters like fire, wind, hail, theft, and vandalism. Owners also face numerous liability risks that are associated with managing swimming pools, spas, saunas, playground equipment, parking lots, and more.

Fortunately, an independent insurance agent can help you get set up with the right condo association insurance or condo insurance if you're a resident. They'll get you matched to the coverage you need fast. But first, here's a breakdown of what condo association insurance is and what it covers.

What Is a Condo Association?

Because of the shared ownership arrangement, condo unit owners must form a condominium owners’ association, which oversees the management of the building. Whether your condo complex has five units or 500, the association is responsible for making decisions for the building(s), managing expenses, making repairs, and ensuring that buildings are properly insured in case of a loss.

All condominium owners’ associations establish rules, or bylaws, that govern the complex. The bylaws outline the requirements for condo association insurance, including specific requirements for the coverage (i.e., deductibles, coverage limits, types of coverage) that the association must purchase.

The condo association insurance covers the unit owners’ shared risks. The building(s) and common elements of a complex are covered with a single policy called a condo association master insurance policy. The association bylaws and the master insurance policy for condo associations specify which parts of the complex the association insures and which parts the individual unit owners must insure through their own condo insurance policy.

What Is Condo Association Insurance and Why Is It Important?

The association master policy typically covers common areas of a condo complex, including hallways, elevators, sidewalks, roofs, and basements. Coverage is also used for building equipment, such as boilers and machinery. In contrast, individual unit owners or residents are usually responsible for insuring everything within the four walls of their homes.

What Does a Condo Association Insurance Policy Cover?

Insurance for condo associations provides one of three types of property coverage in the association master policy:

Bare walls coverage: This insures basic building elements, such as the walls, roof, floors, and elevators. Unit owners must obtain coverage for items such as countertops, bathroom and kitchen fixtures, flooring, appliances, carpeting, cabinets, wall coverings, and other items in the unit. Bare walls coverage also may require unit owners to insure the interior walls of their units.
Single entity coverage: This insures the basic elements of a building and standard finishes inside each unit, except for the unit owner’s personal property. Single entity coverage does not cover improvements made at a unit owner’s expense. If, for example, a unit owner updates countertops or installs new carpet or lighting fixtures, the new and more expensive finishes are not covered by the association master policy.
Modified single entity/all-in coverage: This covers fixtures, installations, or additions/improvements within the interior surfaces of the perimeter walls, floors, and ceilings of individual units. The unit owner’s coverage needs are limited because the association master policy provides comprehensive coverage for standard or upgraded permanent fixtures and finishes and for additions and improvements. Unit owners must purchase coverage for their personal property.

The association bylaws may further specify what is and is not covered by the association master policy and what types of coverage unit owners must purchase.

Condo Association Insurance Must Include Liability Coverage

Condo association insurance coverage must also address the potential for lawsuits. The association can be sued after a simple slip or fall on the grounds. If the complex has a pool, hot tub, fitness center, or other shared spaces, the possibility of bodily injury or property damage occurring on the premises is even greater.

General liability insurance provides broad coverage for the kinds of accidents that can occur at your complex. You need coverage for the delivery person who trips on the sidewalk and for the visiting grandchild who gets injured in the community pool. Further, the association can be sued for damages if the complex fails to provide adequate security and a unit owner or guest is attacked or burglarized.

Most condo association insurance policies provide between $2 million and $5 million in general liability coverage to protect the association from lawsuits in these types of situations. A condo association can also buy umbrella insurance to extend its liability coverage limits beyond the underlying policy.

In addition, individual unit owners typically purchase personal liability coverage to protect themselves from lawsuits related to incidents that happen inside their units.

What's Included in Condo Association Insurance Coverage?

A comprehensive condo owners’ association insurance package might include the following additional types of coverage:

Directors and officers liability insurance: This protects directors and officers of the condo association if they get sued due to their performance on the board. Board members volunteer their time to help make important decisions for the association. This coverage protects them from being held personally liable for decisions they make in that role.
Crime and fidelity coverage: This provides coverage for the theft of association funds or for other financial misconduct by an association board member.
Equipment breakdown/boiler and machinery coverage: This covers damage and loss of income caused by a breakdown of covered equipment, such as steam boilers or other mechanical systems.
Workers’ compensation insurance: This protects employees who work on the premises from the costs of work-related illnesses or injuries.
Flood insurance: Damage caused by hurricanes or floods is typically excluded from the association master policy. If your condo complex is in an area susceptible to these events, you can purchase specified hurricane or flood insurance.
Sewer backup coverage: Most association master policies exclude coverage for damage caused by a sewer backup. Sewer backup coverage provides reimbursement for damage related to a sewer or drain backup up to a specified limit.

An independent insurance agent can help your business assemble a comprehensive condo association master policy.

How Is Condo Association Insurance Different from Individual Condo Insurance?

Condominium unit owners face the same risks as all homeowners. They can lose belongings to fire or theft and get sued for causing injury or property damage to others on their property. On the other hand, condominium owners have different coverage needs from renters or typical homeowners, meaning renters insurance or homeowners insurance won't work for them.

Condo owners need only to insure the portion of the building they live in and their personal property. Their specific insurance requirements are outlined in the condo association’s bylaws and association master policy.

Condo unit owners should be aware of what they “own” when they buy their units. An independent insurance agent can help them determine what they need insurance for and how much to buy. They need coverage for their personal belongings as well as certain structural elements of the building as laid out in the condo bylaws.

Basically, individual condo insurance is necessary to protect the personal belongings of residents who own and live in a single condo. This coverage protects everything within the walls of their specific unit.

The condo association's master policy coverage begins at the walls and extends outwards to common areas. It also covers the actual makeup of the individual's condo unit walls, including drywall, insulation, studs, etc.

How to Find the Right Condo Association Insurance

The best way to find condo association insurance is to work with an independent insurance agent who can obtain multiple competitive quotes from different condo association insurance companies. An independent insurance agent can educate you about the different coverage options available and help you determine what you need in a policy. They'll also be able to help file claims for you and update your coverage as necessary.

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