Townhouse and Condominium Insurance
If you have purchased a townhome or condo, you will have a need for townhouse and condominium insurance. A local agent can help you understand what is covered on the “master policy” of the association and what you will need to insure on your individual policy.
Associations have a board of directors and usually a property management company that select the master policy each year. The by-laws of the association are extremely important to understand. The by-laws indicate exactly what the master insurance policy will cover and what the unit owner must cover on a personal insurance policy.
Remember, an owner of a condo or townhome will need two insurance contracts.
- A “master policy” provided by the townhouse or condo association.
Typically, the association policy covers common areas you share with others in your building like the exterior of the building including the roof and siding. However, by-laws can be very specific in what is covered by the association. As insurance professionals we use terms such as “studs in” and “studs out.” These general terms are used to describe if the master association policy will cover the interior and exterior of the building. “Studs in” association policies are the most comprehensive building coverage while “studs out” mandates that the unit owner insure the interior of the building. The interior of the building often refers to walls, paint, flooring, fixtures and mechanicals for a particular unit. However, no set of by-laws are identical so a review of these by an insurance professional is very important.
- Your own insurance policy.
This provides coverage for your personal possessions, loss of use, personal liability and loss assessment coverage. Depending on the by-laws the individual policy can also cover walls, paint, fixtures, cabinets and other interior building features. The coverages available are very specific and a local agent can help determine what coverages are necessary.
Even if the association has a “studs in” master policy, each unit owner should have a personal insurance contract. Personal liability can protect the unit owner if there is a lawsuit naming the unit owner. The master policy will not always provide liability protection for the unit owner. For this reason alone, having a personal policy is the right thing to do.
Loss assessment coverage
This reimburses you for your share of an assessment charged to all unit owners as a result of a covered loss. Loss assessment is a very important coverage to have on your policy. Wind and hail deductibles have been increasing on townhouse/condo policies and if your association gets hits with a big hail storm the association has to pay the master policy deductible. The association can assess the unit owners for their portion of the deductible. If the unit owner carries loss assessment coverage, a claim can be turned into the personal policy of the unit owner and have the deductible paid. Loss assessment coverage is very affordable and is a must add coverage!
Sewer and drain backup
This insures your property for damage by the back-up of sewers or drains. Sewer and drain backup might not be covered by the association policy. This coverage is a very important addition to your individual policy.
Flood or earthquake
If you live in an area prone to these disasters, you will need to purchase separate flood and earthquake policies. Flood insurance is available through FEMA’s National Flood Insurance Program. Both flood and earthquake insurance can be purchased through your insurance agent.
If you own expensive jewelry, furs, firearms or collectibles, you might consider getting additional coverage since there is generally a $1,000 to $2,000 limit for theft of certain items. Floaters are used to cover these more expensive items. An updated appraisal is needed to add the coverage to the policy.