Condo Association Insurance for Newbies – 2024 Guide

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So, you’re the newest board member of your Condo Association? Congratulations! It can be a rewarding position to hold. But there’s lots of work behind the scenes. And much is never noticed until it goes wrong – like insurance. Not being insured for a catastrophic event could cost millions of dollars.

You’ve probably got Homeowners insurance – right? You may not even know your Association needs insurance too. Not many owners do. But ensuring the complex is now your duty. And there can be serious consequences if you neglect it. Here’s what you need to know.

What is Condo Association Insurance?

Condo, or Homeowners Association (HOA) insurance, covers common property and structures. (Whereas your Homeowners insurance policy covers your unit.)  The HOA insurance policy is known as the “master” policy. Moreover, you can click here to find out more about the process of application for insurance for Condominium Associations and Home Owners Associations.

What Typical Coverage Should Your HOA Insurance Have?

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1. Property and Building Ordinance insurance

Building Ordinance is a type of insurance that you can use to cover all of the expenses related to repairing, demolishing, rebuilding, and constructing. In most cases, you will need this policy in case there are changes related to urbanism in your area. Officials are constantly updating these regulations to create a better and more attractive environment, especially in bigger cities.

However, these regulations might lead to the required rebuilding of your house or an apartment. Therefore, investing in Law insurance will cover all the expenses for the reconstruction. Moreover, this insurance also covers damage caused by poor construction. There are three main segments covered by this insurance, which are related to undamaged parts of the building, demolition, and raised costs of construction.

2. General Liability

While this type of policy is most common for businesses because it can cover expenses related to injuries of the employees, theft, and tool malfunctions, you can also include this insurance in the condo association. Since it can cover the costs of medical treatments, you can use it as a cover for people in your building that somehow get injured inside of it. For example, if someone slips on a wet floor.

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3. Directors and Officers Liability

As a fresh member of the condo association, you will have to learn how to organize everything in your community. Your group has a responsibility to deal with all kinds of problems and resolve them in the shortest time. On the other hand, there is always a risk that someone might sue you in case the person think about how your management is avoiding rules.

Therefore, Directors and Officers Liability is great as a defense from potential false claims because it will cover the expenses for hiring lawyers. The biggest advantage is that this insurance will cover your expenses even in the case that you are proven to be guilty of the accusations.

4. Fidelity Bond/Employee Dishonesty

Fidelity Bond insurance is an excellent way to protect all of the members of the group from potential scams. Every condo association operates with funds, and this policy will cover the potential theft if some of the members steal the money from the funds.

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Some Common Exclusions to Watch Out For

You have to know that there are many types of insurances created for different coverages. When it comes to Homeowners Association policies, some specific events are excluded in most cases, such as hurricanes, floods, sewer blockages, and earthquakes. On the other hand, you can insist on adding some of these in case your building is prone to them.

Premiums and Deductibles

The most important thing about choosing the right type of Homeowner Association policy is to be aware of all potential expenses and that the insurance will be capable of covering them. If you choose the wrong policy, owners will have to pay in for some expenses.

Is Condo Insurance a Legal Requirement?

When it comes to the regulations related to the Homeowner Association insurance, each state has some differences in the law. However, these terms are mandatory in most of them. Also, your association might need additional covers. There are many states where constructors and clients would refuse any sort of collaboration if you don’t own an insurance policy for your condo. The same is with banks that will refuse to provide you with a mortgage without the HOA insurance.

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Work with an Expert Broker

You should know that many brokers are not familiar with HOA insurance. Therefore, you will have to choose one with advanced knowledge and a lot of experience with the community association. Moreover, a good broker needs to know your area along with all of the perils and laws. Nevertheless, you should meet with your broker at least once a year and provide him with a copy of your Association’s governing documents. Also, you should keep him informed about any changes and improvements when they happen.

It can be very beneficial to always research and look for better solutions related to insurance policies. Officials and insurance companies are constantly bringing changes, and you should keep track to assure that all of the factors in your community will be covered, and to choose the most affordable policy. It pays to do your insurance research as a board member newbie. Who knows, you may just pick up that insurance policy item that other board members may have missed.

The main feature of every good Home Owner Association is the ability to choose the best solutions that will resolve any issue in the best way and keep all of the people in their community satisfied. Also, you should choose one that is affordable but still capable of covering any sort of a problem that might occur in the building.

Another advantage of condo and homeowner policies is that they are much cheaper than single policies that each member of a building or a neighborhood will have to pay for his home. Also, it can cover issues that are outside your apartments, such as problems in the hallway, elevator malfunctions, electric installations, and much more.