Tips to prevent gaps: For Unit Owners:
Understand what your association declaration and the applicable state statute provisions say about insurance. Understand if you have any potential responsibility for the association’s insurance deductible.
Align Policy with Declarations
Work with a professional insurer that you trust and that is in tune with your specific needs. They can ensure your unit owner policy is in alignment with the association declarations. Also, inquire about loss assessment and earthquake loss assessment coverage. These coverages will assist with potential costs that may be passed on to a unit owner. Also inquire about loss of use coverage in the event you must vacate your unit for repairs related to a covered loss and need temporary housing.
As a rule of thumb, each unit owner should have enough real property coverage to cover the association insurance deductible. Example: If the association has $25,000 deductible, the unit owner should have at least $25,000 of real property coverage.
Tenants Must Be Insured
If you rent out your unit, be sure that your insurance covers you adequately for that use and that your tenant also has adequate insurance. Should a loss occur that renders the unit temporarily unlivable, your tenant’s policy should also include loss of use coverage to cover the cost of temporary housing while repairs are being completed.
For Managers
& Board Members: Understand what your association declaration and the applicable state statute provisions say about insurance. This should be an important part of onboarding any new client or board member.
Educate unit owners on what they need for personal insurance.
Review State Statute
Work with an insurance professional that specializes in community associations. They can ensure your master policy is in alignment with applicable state statute and association declaration and help educate unit owners on what they need for their personal insurance. Clarity in the difference between these two will help your association minimize coverage gaps.
Align master policy with state statute and association declaration.
Annually (or more often if there are changes to the policy), be sure to communicate those changes to the membership. This gives you at least one opportunity per year to remind owners of their responsibility and is especially important if there are significant changes to coverage or deductible amounts.
this misconception can lead to painful consequences. Without proper insurance coverage, unit owners could face large out-of-pocket expenses to fix the real property in the event of a loss. It also can put a board of directors in an uncomfortable position as they try to assess the necessary costs back to an already frustrated unit owner.
Without proper insurance coverage, owners could face large out-of-pocket expenses.
Sources of Misinformation
Misinformation on who covers what can come from a variety of sources. Sometimes it comes from talking with other unit owners, friends or even a real estate agent who isn’t well-versed in community association operations. Just because an individual didn’t cause a loss that results in an insurance claim doesn’t mean they don’t have some financial responsibility. Working with professionals who are experienced with insurance related to community associations can simplify the insurance process and ensure that all parties have the right protection in place.
Adequate Insurance
In summary, here are a few practical tips for ensuring all parties are adequately insured and there are no gaps in coverage:
Staying educated and informed can help pave the way to success and minimize frustrations when it comes to insurance related issues.
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