What is Condo Association Master Insurance?
This type of policy is particularly popular in Florida. Condo buildings have unique insurance needs because each unit owner also owns a portion of the entire building. In this ‘shared ownership’ situation, the condo building residents form a condo association to oversee the management of the building. Every condo building requires a master policy which provides coverage for the shared risk of all condominium owners, such as general liability and common area property. This master policy is purchased by the condo association and, usually, the condo owner’s monthly dues cover the cost of the insurance premiums. Individual unit owners also need a separate policy to cover their personal property.
What does Condo Association Master Insurance cover?
For common property, there are different levels of coverage and the requirements of the condo association determine which one will be used. The most basic master insurance covers common property, such as the roof, elevators, and boiler. More inclusive policies will include the owner’s personal property. Some key terms associated with this coverage are ‘bare walls-in’ versus the more inclusive ‘all-in’.
General liability policies are familiar to most people and cover injuries or mishaps that occur on condo grounds. These policies are fairly similar to one another, and usually only differ in the amount of coverage purchased.
What are additional coverage options?
The master insurance policy can also include additional options which are fairly economical. Here are some of the more important types of optional coverage that can be added to the policy:
- Crime and Fidelity – if one of the condo association members steals from the association or acts in some other illegal manner, a Crime and Fidelity add-on will pick up the tab. This is an important policy addition because theft occurs more frequently than most people realize, and it can be hard to rally the condo owners to cover the costs.
- Directors and Officers Liability– provides coverage in the case of a lawsuit against one of the condo association members. This type of coverage is important because the condo association officers are usually volunteers and are in no position to deal with a lawsuit. Directors and Officers insurance enables condo owners to participate in the condo association without fear of personal financial loss. In order to encourage board participation, as well as to protect the condo owners, the condo association should obtain Directors and Officers Liability coverage.
- Demolition – covers the cost of tearing down a structure and removing the debris after a natural disaster or some other event that causes damage. While it is true that nobody likes to plan for a disaster, people like paying for it even less. At a time of crisis, the demolition add-on can give owners one less thing to worry about.
Who is responsible for purchasing master insurance?
The condo association is responsible for the purchase of master insurance. As representatives of the condo owners at large, the association functions as a separate legal entity on behalf of the condo complex. The condo association is, in turn, bound by an agreed upon set of bylaws. For insurance-related decisions, these bylaws spell out in detail the parameters of the policy that will be purchased. The details of these parameters include levels of liability, the amounts of the deductibles, and coverage limits for individual units. It is important for the condo owners to be familiar with these bylaws and the details of the master insurance policy because this information will be instrumental in determining their own individual policies.
Does a condo association master policy have deductibles?
Yes. In fact, the amount of the deductible is one of the major factors that determines the parameters of the master policy. If a policy is invoked for damage to a shared area, the policy will only kick in after the deductible is paid. Therefore, the onus for this payment falls upon the individual condo owners, and will certainly be regarded as an unexpected and unwanted expense. Recent trends show a significant increase in the amount of the deductible selected by condo associations. This is one area where it makes sense for condo owners to be actively involved in the decision making process.