We receive many inquiries from unit owners asking what steps they can take to properly insure themselves individually against loss that may be limited or not included within the Master Condominium Insurance program.
We always recommend that each unit owner carry a “condominium unit owners” policy also known as an HO-6 policy. These policies are designed to provide coverage for both the unit owners’ personal property and personal liability. Unfortunately, statistics show that as many as 50% of unit owners do not maintain this coverage.
It is all too common for a special assessment to be charged against the individual unit owners as a result of a loss the Association incurred due to lack of coverage, insufficient coverage or absorption of a large deductible. How can unit owners protect themselves from such an assessment? There is an extension of coverage available within the Condominium Unit Owners policy known as “loss assessment coverage”. This coverage may be purchased by endorsement or sometimes automatically included within the policy form. This coverage provides reimbursement for the type of special assessment referenced above.
In addition, many carriers will allow the loss assessment coverage to include earthquake. This would provide coverage for a special assessment arising out of damage caused by an uninsured or underinsured earthquake loss. Keep in mind that some carriers may not offer this coverage unless the Association maintains some minimal amount of earthquake coverage
Finally, loss assessment can be used along with other methods to provide coverage for a loss assessed to a unit owner that is covered under the Master Insurance policy, however, the loss is under the deductible (usually $5,000 or $10,000).
Below is a summary of some of the coverage’s offered within an HO-6 (Condo) Policy. (HO-6 Policies also known as Condominium Policies.)
Because your personal property and liability are NOT covered under the Association Master Policy, we recommend that every condo owner purchase their own Condo Owners (HO-6) insurance policy. This policy is designed to cover
PERSONAL PROPERTY: This coverage is for items such as your clothing, furniture, jewelry, television, etc.
ADDITIONAL LIVING EXPENSE: This coverage is for your unit if it becomes uninhabitable due to an insured loss)
PERSONAL LIABILITY: Covers you for lawsuits, legal & medical expenses if you’re legally responsible for injury or property damage to others.
CONDO BUILDING COVERAGE: To cover upgraded carpeting, wooden flooring, window coverings, built-in cabinets or bookcases, finished surfaces, wall or ceilings. This coverage is important to consider as you may be responsible for interior losses or damages. The deductible is usually much lower than the deductible on the Association Master Policy. This may be required by your lender
LOSS ASSESSMENT: Covers your share of assessments that may be charged by the HOA for property or liability losses
EARTHQUAKE LOSS ASSESSMENT: Covers your share of assessments charged against you by the Association for damages caused by an earthquake.