Condo Insurance Q&A: 29 Essential Questions Answered by an Insurance Agent
Intro:
Whether you’re a condo board member, property manager, or risk professional, understanding condo insurance is critical to protecting your community. We’ve gathered 29 of the most frequently asked questions from condo associations and risk managers—answered by a licensed insurance agent with extensive experience in HOA and condo master policies.
1. What is a master insurance policy and who purchases it?
Agent:
The master insurance policy is purchased by the condominium association and covers common areas like hallways, roofs, elevators, and shared amenities. It typically includes property coverage and general liability, protecting the association against damages or lawsuits occurring in communal spaces.
2. What’s the difference between “bare walls,” “single entity,” and “all-in” coverage?
Agent:
- Bare walls: Only covers the structure and common elements (not unit interiors).
- Single entity: Includes unit interiors built to original specs (walls, fixtures).
- All-in: Covers everything in the unit including upgrades—except personal property.
3. What does the condo owner need if the association has a master policy?
Agent:
Owners still need an HO-6 policy. It covers personal belongings, interior upgrades, personal liability, and loss assessment (when the association charges owners to cover a claim shortfall).
4. Does the master policy cover water damage inside a unit?
Agent:
It depends. If the source is from a common element (like a roof leak or burst pipe in shared walls), the master policy might respond. However, damage to personal property or finishes is often the unit owner’s responsibility through their HO-6.
5. How is the building’s replacement cost determined?
Agent:
We use a Replacement Cost Estimator (RCE) tool that factors in square footage, materials, construction type, and labor costs. Annual reviews are recommended to adjust for inflation and local market shifts.
6. Who is liable if a resident slips in a hallway?
Agent:
The condo association could be held liable, and the master general liability portion of the policy would respond. If poor maintenance is to blame, this strengthens the claim.
7. Does the board need Directors & Officers (D&O) insurance?
Agent:
Absolutely. D&O insurance protects board members against allegations of mismanagement, discrimination, breach of fiduciary duty, and wrongful decisions—even if those claims are groundless.
8. What is loss assessment coverage and why is it important?
Agent:
If a claim exceeds the master policy limits or falls under the deductible, the board may levy a special assessment on owners. Loss assessment coverage on the HO-6 can help an owner pay their share.
9. Can the board be sued personally if there’s no D&O policy?
Agent:
Yes. Without D&O, board members’ personal assets could be at risk. Volunteer status does not shield you from lawsuits.
10. What coverage should be in place for amenities like pools or gyms?
Agent:
These require liability coverage under the general liability portion of the master policy. Pools may also require higher limits and additional safety protocols to remain insurable.
11. Does insurance cover theft or vandalism of common property?
Agent:
Yes, under the property section of the master policy. This includes stolen outdoor furniture, vandalized walls, or broken light fixtures.
12. How does the deductible on the master policy work?
Agent:
It’s typically a large deductible—sometimes $10,000 or more. For unit-specific damage, the association might pass this cost on to the unit owner, depending on the bylaws.
13. Are floods or earthquakes covered under standard policies?
Agent:
No. These require separate flood or earthquake insurance policies. FEMA flood zones, state laws, and risk exposure should guide whether these are needed.
14. Who pays for damage caused by a unit owner’s negligence?
Agent:
The unit owner’s liability policy (HO-6) should respond, especially if they left a sink running or caused a fire. The association may initially pay and subrogate later.
15. Can the association require unit owners to carry HO-6 insurance?
Agent:
Yes, and many do. The association can amend bylaws to mandate HO-6 coverage with minimum liability and dwelling limits.
16. What if the condo is still under developer control?
Agent:
Developers are responsible for initial insurance, but gaps can exist. Boards transitioning from developer control should conduct a full insurance audit with an agent experienced in condo transitions.
17. How often should we review our insurance policies?
Agent:
Annually. Rates, deductibles, limits, and building values change frequently. A comprehensive review ensures proper coverage and pricing.
18. What does “named perils” vs. “all-risk” mean?
Agent:
- Named perils: Covers only perils specifically listed (e.g., fire, theft).
- All-risk (open perils): Covers all perils except those specifically excluded. More comprehensive and preferable for associations.
19. What’s an umbrella policy and does our association need one?
Agent:
An umbrella adds extra liability coverage above your general, auto, and D&O policies—typically in $1M increments. Most associations benefit from at least $1–5M in umbrella protection.
20. How do we handle insurance for unit renovations or upgrades?
Agent:
Upgrades are usually not covered under “bare walls” or “single entity” master policies. Owners should insure upgrades on their HO-6 under building property coverage.
21. Can the association get insurance for aging buildings or deferred maintenance?
Agent:
Yes, but it may be costlier or require exclusions. Insurers may inspect and demand repairs or increase deductibles for aged systems like roofing or plumbing.
22. Are legal fees covered if the association gets sued?
Agent:
Yes, if the lawsuit falls under D&O or general liability coverage. Defense costs are typically covered, even if the claim is baseless.
23. Should we worry about cyber liability?
Agent:
If you collect dues online or store personal information, yes. Cyber liability insurance can cover data breaches, phishing scams, and legal costs.
24. What if someone is injured during a board-sponsored event?
Agent:
Your general liability policy should extend to social events, but confirm with your carrier. Large events may require event-specific coverage or waivers.
25. What coverage do we need for property managers?
Agent:
If you hire a management company, ensure they carry E&O and general liability. If self-managed, consider adding Fidelity Bond and employee dishonesty coverage.
26. What is ordinance or law coverage?
Agent:
It covers the cost of rebuilding to meet modern building codes after a loss. Especially vital for older condos where local codes have changed significantly.
27. Do we need insurance if the condo is mostly rentals?
Agent:
Yes—and more scrutiny is needed. Higher rental rates can increase liability and property risks, possibly raising premiums or limiting insurers willing to quote.
28. How do we file a claim, and who is involved?
Agent:
Notify your agent or carrier immediately. Provide documentation, photos, and board meeting notes if applicable. Your agent helps coordinate between adjusters and contractors.
29. What’s the most common mistake condo boards make with insurance?
Agent:
Underinsuring the building or not understanding the deductible structure. Also, assuming their policy covers unit interiors or relying too heavily on the management company for compliance.
Conclusion:
Understanding your condo’s insurance responsibilities is critical to protecting your residents, finances, and reputation. Review your policy annually, ask questions, and work with an agent who specializes in community associations.
Need help reviewing your current policy? Contact us today for a no-obligation consultation.
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