Guide to Condo Master Insurance
Research shows that five million American households call a condominium home.
Are you responsible for managing one of those units?
Maybe you’re a board member of a condo association. Or, you might be a property manager. Either way, you play a major role in the decisionmaking process that goes into maintaining this structure and protecting its occupants.
In this case, you need access to the people, plans and resources that can help you perform in this capacity. A condo master insurance policy is one of them.
Today, we’re diving into what this coverage entails, why it’s necessary, and how you can obtain it today. We’ll also answer some of your most pressing questions, so read on!
1. What is a Condo Master Insurance Policy?
A condo master insurance policy is a type of insurance policy that are designed to cover the physical structure of your condominium, as well as any common areas within it.
You might also see this type of policy referred to as Condominium Association Insurance or an HOA Master Policy. All condominium and co-op associations require a condo master insurance policy. The property and liability coverage it provides protects the interests of the association and the unit owners.
2. What Does the Master Policy Cover?
A condo master insurance policy protects your condo association from being held liable for personal injuries or property damages that occur at the exterior of your building or the common areas within it.
In addition, there are also coverage levels that extend some protections to the interior of the units themselves.
The general liability protection coverage provided by a master policy protects your association in the event that a bodily injury or property damage occurs for which you’re legally responsible. It includes all aspects of commercial general liability coverage, including
- Personal injury
- Advertising injury
- Medical expenses
- On-premise accidents
- Off-premise accidents
- Products or completed operations
- Legal defense costs
In addition, general liability insurance also includes a fire damage limit that kicks in if there’s fire damage to your rented premises. Optional general liability add-ons include commercial umbrella insurance (excess liability coverage) and additional coverage to protect directors and officers against claims from stakeholders including stockholders, employees, and clients.
Note that a master insurance policy covers injuries sustained by both residents and guests. This means the visiting grandchild in the pool is just as protected as the full-time resident using the treadmill.
A master condo insurance policy will also include all aspects of commercial property coverage. This protects the policyholder from the loss or damage of any real property (land, buildings) or personal property associated with the designated coverage area.
In terms of buildings and business personal property, the policy covers the structure in its entirety, including:
- The actual building
- Completed additions
- Any outdoor structures
- Permanently installed fixtures
- On-site machinery
In addition, optional property insurance coverage includes employee dishonesty coverage, which protects your association from financial or property loss that results from a worker’s fradulent act. You can also choose to add Inland Marine Insurance to cover any in-transit property on your premises, or items left in your care by others, including contractor’s equipment.
3. What Are the Areas of Coverage?
A condo master insurance policy covers:
- The condo structure
- The grounds around the condos
- The common areas
Let’s take a look at each of these in greater detail.
The Condo Structure
As with any insurance coverage, there are a few distinctions that policyholders can make when they’re deciding on their plan. In terms of the condo structure itself, association members can choose between three main types of coverage.
Bare Walls-In Coverage
First, there’s “Bare Walls-In” coverage or “Studs-Out” coverage. This policy focuses on the condo’s actual, physical structure. This includes only the materials required to construct and uphold the units, including the:
While this list might look exhaustive, it’s actually the most minimal.
A Bare Walls-In policy does not cover anything inside of the unit themselves. Rather, it’s designed to solely protect the building’s exterior and any shared spaces inside. This means it kicks in if the roof has hail damage, the elevators stop working, there’s an accident in the main lobby, or a similar situation occurs.
In turn, each owner is responsible for seeking additional coverage to help protect the structural elements inside their units. These include:
- Original appliances
Single-entity coverage includes everything listed above under the walls-in coverage. However, the difference here is that this policy also covers certain types of built-in property, such as some finishes and light fixtures.
Note that it only covers the fixtures that were original to the unit. That means if an owner makes upgrades or improvements at their own expense (e.g. updating countertops, replacing the carpet, changing out light fixtures), the newer and more expensive finishes are not covered by the master insurance policy.
As an alternative, board members can choose to select an “All-In” policy. This policy includes all of the materials listed above. In addition, it also covers all of the structural elements and fixtures associated with each unit. In most cases, it will also include built-in appliances, as well as any upgrades or improvements that the owners make to their units.
Unit owners protected by an all-in master policy will likely require less individual coverage against property damage because the only property they’re directly responsible for is their own personal belongings.
In addition to the condo structures, a master insurance policy will also cover any injury or damage that occurs on the shared grounds associated with the property. This includes any grassy areas, playgrounds, parks, walking trails, and similar spaces.
The property grounds also include parking lots, sidewalks and walkways.
In most condos, there are common areas that are shared by the residents of the individual units. Depending on the size of the property and the level of amenities it offers, these can include:
- Hot tubs
- Fitness centers
- Event spaces
- The master office
- The clubhouse
Most master policies are built to cover both limited common areas, as well as general common areas.
How are the two different? Limited common areas are those that are not accessible to all unit owners. For instance, there might be staircases that only certain residents require access to. Or, there could be a shared patio that only adjacent neighbors own and use.
On the other hand, general common areas are those listed above. They’re open to all unit owners and are not limited to any particular group. In addition to shared buildings, this also includes elevators, roofs, basements, and other shared spaces.
5. Are There Any Exceptions?
A master policy is designed to be as seamless as possible. Still, there are some instances and accidents that might fall outside of the realm of coverage.
This includes any improvements or betterments that the unit owners decide to make to their interiors. For instance, owners might choose to replace their carpet with hardwood flooring or remove the original bathroom light fixtures for a more modern installation. Unless the association has an All-In policy, these updates would fall outside of the realm of coverage provided by a condo master insurance policy.
In addition, the policy is only designed to protect up to a certain limit of a covered loss.
This means that there is always the chance that a severe or significant accident could occur and exceed its boundaries.
For instance, a massive fire might break out in your lobby and extend to your fitness center, conference center, and event space. You have a master policy for $1 million, but the damages equal $1.2 million. This means the amount of coverage that your policy provides isn’t enough to restore the property back to its original condition.
In this case, the unit owners would be held liable for what the policy does not cover, splitting the cost among themselves.
4. Are Unit Condo Owners Fully Covered?
As soon as someone signs on as a unit owner, he or she becomes automatically included as a policyholder under the condo master insurance policy. From that point forward, a portion of the condo fees they pay will go toward the premiums required to maintain that policy.
However, one of the most common misconceptions surrounding this coverage is that once unit owners are covered by this policy, they don’t need to pursue any other type of insurance.
This isn’t true.
While condo associations take care of the property’s exterior and common areas, they do allow unit owners the freedom to control what’s inside their homes. This way, there’s a balance of ownership, liability, and responsibility between the owners and the association.
As mentioned, the master policy only provides limited coverage for the condo structure itself and any common areas. With the exception of an All-In policy, it also omits any fixtures, appliances, or improvements made to the condo.
As such, most unit owners still choose to pay for supplemental personal condo insurance to help protect:
- Their personal belongings
- Their personal liabilities
- Any improvements made to their unit
Personal Condo Insurance
While it isn’t required, investing in personal condo insurance is a smart idea for unit owners. Those who own the property outright can discern for themselves whether or not the policy is necessary. However, anyone who finances or mortgages their unit will almost always be required to purchase personal condo insurance per their lender.
As described above, personal condo insurance covers personal belongings, personal liability, and unit improvements. This way, if a visitor gets injured inside a condo unit, the owner’s policy would cover their treatment.
This coverage also extends to property damage that an owner causes to another unit. For instance, say an owner leaves their bathtub filling up for too long, and the water seeps onto the floor, damaging the ceiling of the unit right below. While the condo’s master insurance policy wouldn’t protect either owner, the at-fault party’s personal condo insurance would kick in to prevent them from paying out of pocket.
It goes without saying that these types of damages can be widespread and extremely costly, which makes pursuing personal condo insurance a sound decision. Especially in cases involving water damage, there might be several different insurance policies that come together to help cover the cost of repairs.
How an Agent Can Help
Working with a reputable insurance agent is a smart way for unit owners to best understand the exact type of coverage they need and how much to buy.
Before you begin researching your options, keep in mind that a condo master insurance policy does carry a deductible. Often, these are higher than most deductibles due to the high extent of damage that could occur. This is why it pays to compare the rates associated with different policies.
An independent agent can help you understand the differences between each policy and help choose the right insurance company to protect your condo association. This agent can also work with both the condo association and owners themselves to make sure there aren’t any gaps in the coverage levels between the master insurance policy and the personal condo insurance policies.
Find the Condo Master Insurance You Need Today
Are you looking for a condo master insurance policy to help cover the units that your board manages or maintains?
If so, we’d love to help.
The best way to pursue condo association insurance is to work with a skilled independent insurance agent who’s well-versed in this industry. This way, you can compare several competitive quotes to find the one that best fits your needs, budget, and plans for the future.
When you’re ready to see your options, get in touch. We’re a team of independent insurance agents dedicated to helping our clients meet a range of personal and commercial coverage needs. Let’s connect and take this next step together!