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Condo Insurance and the CC&R: 4 Tips for Securing the Right Coverage

When it comes to condominium purchases and insurance, determining your coverage needs can be a confusing process. Complicating the picture further is that unlike the purchase of a home, when buying a condo, the mortgage is not typically tied to the unit itself carrying coverage. As a result, condo insurance is typically inexpensive, yet often overlooked.

According to HUB International Northwest's Amy DeForeest, the company's Regional Personal Lines Practice Leader, “Condo coverage is challenging because it’s different from homeowner’s insurance in ways most buyers don’t realize. This makes it easy to forget that you need it.”

Frequently, buyers incorrectly assume that the building’s master policy covers more than it does. In most cases, by the time a customer starts thinking about condo insurance, they’ve already made a purchase or are in the process of doing so. 

Julie Johnson, a Hub Personal Lines Account Manager, recommends engaging your insurance broker as early as possible. He or she will be your best resource in ensuring your policy matches up with what the homeowner’s association (HOA) requires.

As Johnson explains, “There’s no rule of thumb about how much coverage per square foot is required. We depend on the unit owner to help us determine a figure, but we’re well aware that this may be uncharted territory for them.” 

In order to get in front of much of the confusion and uncertainty surrounding condo insurance, Johnson recommends close scrutiny of the Covenants, Conditions and Restrictions document (CC&R). As defined by Realtor.com, a CC&R is “the governing document that dictates how the [condo] association operates and what rules the owners - and their tenants and guests - must obey. These legal documents might also be called the bylaws, the master deed, the houses rules or another name. These documents and rules are legally enforceable by the association, unless a specific provision conflicts with federal, state or local laws.”

Obtaining the CC&R is critical because many associations will explicitly detail what buyers need to ensure. But the language can be hard to find…and even harder to read. Your HUB broker can help sort through it. Johnson describes this partnership as “just good customer service.” 

Some HOA master policies offer “walls in” coverage for the building and individual units – wiring, sheet rock, cabinetry, light fixtures and more. But DeForeest explains that these cases are unusual. Instead, most master policies require coverage at the unit level. She says, “You’ll find an HOA policy that specifies the exact dollar amount for which a unit owner is responsible. In other scenarios, the CC&R includes language along the lines of ‘we cover everything except the following…’” 

Even with the benefit of a CC&R, repair and replacement costs can be difficult to estimate. DeForeest and Johnson provide four tips for arriving at the most accurate figure:

  • Understand loss assessment. Some associations don’t include coverage for common areas. When damage occurs there, each unit owner will receive an assessment to pay for repairs. Policies can be purchased to cover this type of assessment. It is so important to understand how you will be billed in the event of a common area loss. 
  • Sometimes associations make policy changes. Your unit coverage should be reviewed annually in conjunction with review of the HOA’s master policy. If changes are made to the master but not reflected in the unit, potential coverage gaps open. It’s your home. Don’t be complacent. 
  • When buying new construction, consult the contractor about potential rebuilding costs. Then speak to your agent before any work begins. It’s always best to identify any issues that could make a policy more difficult to place, and work through them, before it’s too late.
  • Review your options. Different carriers offer a variety of feature and add-ons (such as earthquake loss assessment). In addition, certain carriers may offer you credits that others won’t. Don’t assume all coverages were created equally.

Johnson says, “Once the buyer obtains the CC&R, there’s a lot we can do to make the process easier.” Your HUB broker can help explain the intricacies of loss assessment, as well as make those all-important calls to contractors and association leaders. Contact us today to learn more about condo insurance and the CC&R.

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