Top 3! Condo Insurance Policy Must-Know FAQs
Owning a condo is different from owning a house. Not only do you not have to mow the lawn or shovel the driveway like your friends in single-family homes do, but your insurance needs are a bit different as well. When you own a condo, you own the inside of the condo unit. It would be nice if we could think of insurance as a one-and-done, but unfortunately, just like gas prices – your insurance changes as well. And yes, one of those changes is the price, but sometimes it is your coverage. You may have purchased your Condo 5 years ago, but the insurance you put in place on day one may not be the best insurance for you today.
These three things should continually be reviewed; we suggest at least yearly:
The condo association or corporation owns the building itself and the grounds, and their insurance does not cover your personal belongings. But your condo insurance does! Why may you need to review the content limit you set back in 2014? Because the price of stuff has changed! Your belongings coverage is based on replacement value, not the original paid the price. That cool couch you got on sale for $150. Could you buy a brand new one for the same price? The good news is that your insurer doesn’t expect you to take your list of belongings every year and figure out the current replacement value. Instead, they added something on your policy declaration page: Inflation Protection.
Inflation Protection is designed to protect you as it increases the total amount of protection (your contents coverage) by an indicated percentage each year at renewal. Why? To keep up with the inflated costs of everything else! Your gas went up; your grocery bill went up; the cost of clothes; your furniture… It all goes up, so the automatic inflation helps ensure you have enough protection. A quick tip: You can change your personal belongings coverage limit. So if after ten years you think inflation protection has increased your limit way too much, we can lower it back down. You just have to ask!
If you have guests over for banana daiquiris and one of your guests slips on a dropped banana peel, you could be held liable for expenses related to their injuries. Lawsuits can be expensive even if you are found not liable; your liability can help with the associated lawsuit costs. This is the most undervalued coverage on your policy, as many clients ask us, ” Can we remove the liability?” No! Even if you could, you shouldn’t want to! I sleep a lot better at night knowing that if my bbq blows up and takes out the building, I don’t have to figure out how I will pay for it. The condominium corporation maintains liability coverage in common areas, but that coverage may not apply within your unit itself. Other situations can create personal liability, such as a candle causing a fire and damaging other units. It’s also the least expensive coverage on your insurance policy. It’s like a $10 difference between each million-dollar increment. If you do the math, that’s a great deal!
Contingent Coverage & Loss Assessment
Let’s talk about the elephant in the room. You’ve likely seen mention of these coverages on your policy, and even after an explanation, you’re sitting there asking yourself, “what is this for again?” Let’s break it down!
Contingent coverage is to cover your interest in your unit if the condo corp has no insurance for a loss, its insurance is inadequate, or it is ineffective. Pro-tip, the cause of the loss to the condo must be an insured peril underneath your insurance. For example, suppose there is an earthquake, and your condo corp building insurance does not have coverage. In that case, you cannot use your Contingent coverage to help pay for the loss because your condo policy does not cover earthquakes either. But say there is a fire and the condo corporation doesn’t have a master policy and, therefore, no insurance to cover a loss; your insurer will pay under your Contingent coverage up to a specific limit. Ah, yes, the limit of coverage! Back in 2021, some insurers limited the coverage you can receive, be sure to review your plan with your broker concerning your policy to see your limit.
Loss Assessment for losses to the condominium property helps you to pay for your share of any special assessment made against you by the condo corp. If something happens to damage any shared property, such as the lobby of your building, it’s no money out of your wallet, right? Not so quick. The truth is the condo association can bill each condo owner when it suffers an unexpected loss. It’s called a loss assessment, and your monthly dues do not cover it. Here’s an example of a Loss Assessment:
Back to our lobby example, if the lobby suffered fire damage that cost thousands of dollars to repair, your condo board could issue a loss assessment for the deductible. If that deductible was $3,000 and your building had ten units, your share would be $300.
But, let’s say the damage was more significant, and after the claim was paid, your condo board was still on the hook for $300,000. Your share of that loss assessment would be $30,000. Standard condo insurance policies have Loss Assessment coverage for this type of occurrence. However, knowing exactly how much coverage your policy provides is essential, so you’re not left trying to cover the expense out of pocket.
If you have condo insurance with our online HWICLICK system, you can change and review any of these things through your client profile with your easy access to the policy and your coverage wording. If you’re more traditional and want to deal with an actual human advisor, that’s great because we have plenty! Contact one of our offices, and an advisor will review your policy with you and make necessary changes.
If you don’t have condo insurance yet, or you’re shopping around, check out our accessible online HWICLICK portal. It lets you quote, buy, and manage your condo insurance in minutes!
Not ready to buy yet? Learn more about Condo insurance and how it works first!