Wednesday, March 21, 2012

Your HOA Insurance DOESN'T Cover Everything

Is your condo under-insured? Homeowner’s association (HOA) policy inclusions and exclusions have always been confusing. As a result, supplemental building coverage is sometimes omitted or inadequate- either intentionally to save money, or out of agent or client ignorance. In the past, HOAs required you to buy a unit owners policy (HO6) to cover the things the HOA policy didn’t, but no proof of insurance was required. In practice, both the decision to insure and to set limits on the coverage was left up to the unit owner.

Not anymore. New rules for condos and townhomes are now being enforced on all new federally insured loans and when refinancing existing loans. Every owner must now have a policy that includes “walls in” building coverage of at least 20% of the appraised value. This usually covers the interior walls, wall and floor treatments, cabinets and fixtures. Each association is different and the responsibility of the unit owner and the HOA is spelled out in the CCR’s and/or by laws.

Condo insurance isn’t just a law, it’s a good idea. If you’ve refurnished your condo with custom cabinets, crystal chandeliers, Berber carpets and marble countertops and it burns down, your HOA policy will compensate you for none of those upgrades. Not to mention your big screen TVs, leather sofas, antique china, jewelry and other expensive personal possessions.

If you own condos in Tahoe or Hawaii as investment properties and they burn down, your HOA policy will not cover your lost rents. It could take months to rebuild and without the rental income, you may not be able to cover the mortgage payments on your units.

Condo insurance is cheap- for $100,000 worth of coverage, you will pay around $300-$400 per year. Inadequate condo insurance is one of the most common errors we see when reviewing client policies written by competing agents. Don’t let this happen to you. Call Chris Falcon or Steve Fox at Allied Brokers to review your condo insurance or get a quote on a new policy.

Visit our website at for information about all the types of insurance we offer. Or call 1-888-505-7988 for a free rate quote.

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