The purchase of a condominium presents the buyer with both traditional loss exposures as well as exposures unique to this type of property ownership. This applies to units purchased for occupancy and units purchased for investment and rental income. Many buyers falsely assume that the Condominium Association purchases all the insurance coverage necessary to protect the individual unit owners. We will briefly describe the coverage purchased by the association and what it does not cover. A condo unit owners policy purchased by you as a unit owner is designed to provide coverage for many of the exposures to loss not addressed by the association's coverage.
The association oversees the purchase of insurance covering the physical damage to the buildings within the complex. Coverage under this policy generally extends to the individual units, up to and including the unfinished interior surfaces of your condominium. You are responsible for all the property that exists within the unfinished interior surfaces of your unit. In other words, everything on the interior side of the walls (and including the paint or wallpaper) of your unit. This includes your furniture, clothing and other personal articles that can be covered under the condo unit owners policy you purchase.
The association may also require you to be responsible for repairing or replacing windows, doors, floor coverings, kitchen cabinets, and appliances in your unit. The by-laws of your particular association identify your specific responsibility and should be reviewed. You will also need to insure any additions and alterations made to your specific unit whether made by you or the preceding owners of your unit. All these items can be insured under the condo unit owners insurance. The association policy does not provide coverage for any necessary increase in living expense incurred by you, as a resident, if your unit becomes unfit for normal use due to a covered loss such as a fire. Likewise it does not pay for your loss of rental income if your tenant moves out due to a covered loss.
Personal Liability for suits alleging bodily injury or property damage is the largest exposure you face as a condo unit owner. The association coverage typically protects the association and its unit owners from suits arising from the common areas such as halls, grounds, parking lots etc.. Your condo unit owners policy can provide liability coverage for claims arising out of the use and occupancy of your unit. Personal Umbrella Liability policies can provide excess liability limits over and above your condo unit owners liability limit.
Finally, a unit owner can be assessed for a variety of reasons. One such reason is a direct physical loss to property owned by all unit owners or a liability suit resulting in a loss, which is not covered by the association insurance. Since such an assessment can be covered under loss assessment coverage of the condo unit owners policy provide the actual cause of loss to the association is covered by the condo unit owners policy.
The condo unit owners policy is designed to dovetail with the condo association policy with virtually no duplication of coverage. The typical condo unit owners policy starts at about $150 annually depending on the limits and coverage you desire.