ACM News

Association vs. Unit Owner Insurance Basics

Posted on November 12, 2015

This article, written by George Thayer from Hollinger Insurance Services, is intended to help the unit owner gain a basic understanding of  what  an association condominium policy is designed to cover and the nuances that may exist. It will help unit owners understand what each is responsible for insuring.  Even if your association is not a condominium, but insures like one, because insurance companies tend to use the same coverage forms for non-condos as they do for condos, understanding the basics of condominium coverage will help you understand how your association is covered so as to aid in determining what you need to cover personally.

If your association is a condominium, the state requires all condominiums to insure at a minimum; the buildings and units up to the unfinished interior surface of the perimeter walls, floors, and ceiling, and includes  limited common elements (this is includes both interior doors and windows), and it will include all fixtures attached within the perimeter walls of a unit as originally installed by the developer. Fixtures include; electrical and plumbing fixtures, HVAC; and attached cabinets.

When a fixture has been upgraded by a unit owner then the unit owner is responsible for insuring that fixture. This is considered a betterment and improvement. Betterments and Improvements are defined as any upgrade of any developer installed fixtures, and include decorative finishes on walls, floors and ceilings.

Condo associations are not required to cover betterments and improvements, but it is possible that since the condo act permits coverage, some boards may have opted to cover them. This can be true for the non-condominium as well. You will need to verify through your association the extent of coverage.

If you are uncertain if a fixture has been upgraded, then it is best to insure it. The association’s policy will always be primary and will adjust accordingly to original specs.

If your association is not a condominium, since the association is not governed by the Condominium Property Act, the association’s declarations and by-laws are going to help determine coverage. This type of association may eliminate all interior fixtures (referred to as bare walls) so it is important to check the by-laws to see if less than the minimum condo act requirements are intended, (or conversely if more than the Condo Act minimum is intended).

Note: While the association may insure several unit components the unit owner may be responsible for maintaining those items. The distinction of damage to property by insured peril (sudden and accidental) and general maintenance up keep of property is important to keep in mind for responsibility.

The unit owner should  keep in mind that even if damage is due to insured peril if the total to association insured property does not exceed the deductible, then association is not necessarily responsible for reimbursement. Sometimes maintenance and insured peril can happen simultaneously. For example, a frozen pipe break and consequential water damage. The repair to the broken pipe may be a maintenance charge to the unit owner while the consequential water damage is an insured peril for both the unit owners insurance and the association’s insurance.

What kind of policy does the unit owner need?

Regardless if you live in a condominium association or one which is not a condo but insures like one, as a unit owner, you are going to need coverage for your unit which will be provided by an HO-6 policy – condominium unit owners policy. This policy is essentially designed to pick up where your associations policy leaves off,, and also will provide coverage for your personal property and for any liability claims arising from within your unit. It also includes important coverages for loss assessment and loss of use.

For example your unit is all original and the association has no provisions for betterments and improvements; the HO-6 responds to replace the decorative finishes on the walls and ceiling, the floor coverings, window treatments, appliances, and of course your furniture and other personal items. It provides coverage if your association charges back the deductible to you and if you incur expenses if having to live elsewhere while the unit was repaired.

Loss Assessment Coverage:

Those living in condominium associations should be aware that the Condo Act does grant certain rights to the board of directors when it comes to handling of the association’s deductible. A board reserves the right to charge back to any unit owner or owners involved in a claim up to the deductible of the association.

If this happens to you, you will want to make sure you have adequate loss assessment coverage to ensure this expense is covered. (Association’s can carry a deductible anywhere from $2,500 to $10,000 or more)

For most insurance companies, the base coverage provided is usually $1,000. You will want to make sure this limit is set to a minimum of the association’s deductible. NOTE: Some companies do not call this loss assessment and may have a special endorsement so you will want to check  with your agent if and how this would be covered.

If you are uncertain as to what you should be covering, a good starting point is always to contact the agent that insures the association. Once that information is provided you can contact your personal lines agent to go over the coverages specific to your needs.

George Thayer


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