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Guide to Condo Master Insurance

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Modern apartment buildings

Understanding the details of a condo master insurance policy is important for both building and unit owners. Since many areas within a condominium complex are shared, it becomes the owner’s responsibility to insure common places. Condo master policies vary in coverage, but each coverage level includes protection for the roof and exterior of the building and shared areas like elevators, recreational spaces, outdoor spaces, and hallways. While the condo association or HOA purchases a condo master insurance policy, unit owners share the cost in routine fees. A condo master policy affects both members of the condo association and condo unit owners.

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 decision-making process to maintain this structure and protect 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!

What is Condo Master Insurance?

A condo master insurance policy is a type of insurance policy that is 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.

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.

Also, there are also coverage levels that extend some protections to the interior of the units themselves.

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, policyholders can make a few distinctions 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:

  • Exterior
  • Framing
  • Roofing
  • Piping
  • Wiring
  • Insulation
  • Drywall

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 itself. 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:

  • Walls
  • Fixtures
  • Flooring
  • Installations
  • Original appliances

Single-Entity Coverage

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.

All-In Coverage

As an alternative, board members can choose to select an “All-In” policy. This policy includes all of the materials listed above. Also, it also covers all of the structural elements and fixtures associated with each unit. In most cases, it will also include built-in appliances and 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.

The Grounds

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.

Common Areas

In most condos, there are common areas that the residents of the individual units share. Depending on the size of the property and the level of amenities it offers, these can include:

  • Pools
  • Hot tubs
  • Fitness centers
  • Gyms
  • 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.

Insurance Coverages

Deductibles

The condo association files a claim when damage occurs. Before the insurance company begins paying for covered damage, a deductible must be met. Typically, condo unit owners divide the deductible amongst themselves. This practice makes repairs easier to take care of, even with a higher deductible like those usually found in a condo master policy.

Liability

Your condo master insurance policy provides liability coverage limited to common areas. This means coverage would be provided for guests injured in common places like the pool, stairway, or tennis courts. It is vital that unit owners also have personal liability to protect guests while inside an individual unit.

Limits

Like every type of insurance policy, your condo master policy coverage has limits. When coverage is exhausted, unit owners are often responsible for a portion of out-of-pocket expenses. Understanding the limits of your master condo insurance policy is important for the condo association and unit owners. Your condo insurance coverage provides liability coverage when exhausted.

Covered Perils

What To Look for in a Condo Master Insurance Policy
Overhead view of a thief stealing from a condo.

Like the types of coverage provided by a master condo policy, covered perils can also vary. To fully understand all the events, limits, and exclusions covered by your master policy, it’s a good idea to discuss the terms of your policy with your independent insurance agent. These are some things you can expect your condo master policy to cover.

  • Fire
  • Vandalism
  • Wind
  • Medical coverage for covered liability claims
  • Legal fees for covered liability claims

Are There Any Exceptions?

A master policy is designed to be as seamless as possible. Still, some instances and accidents 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 more modern installation. Unless the association has an All-In policy, these updates will 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 that your policy’s amount of coverage 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.

Are Unit Condo Owners Fully Covered?

As soon as someone signs on as a unit owner, they become 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 insurance type.

This isn’t true.

Why?

While condo associations take care of the property’s exterior and common areas, they 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

Important Details in Your Condo Master Insurance Policy

Whether you’re responsible for purchasing a condo master policy or you’re a unit owner ready to purchase additional coverage, it’s important to understand certain features of the master policy. Carefully examining your condo master insurance policy will help you avoid gaps in coverage. The coverage provided by a condo master insurance policy can vary widely, and understanding your policy’s terms can help you prepare for the unexpected. Look for these details in a condo master insurance policy.

  • Updates and improvements made by the unit owner.

Like every type of insurance policy, your condo master policy coverage has limits. When coverage is exhausted, unit owners are often responsible for a portion of out-of-pocket expenses. Understanding the limits of your master condo insurance policy is important for the condo association and unit owners. Your condo insurance coverage provides liability coverage when exhausted.

Using a Master Condo Policy to Determine Personal Condo Insurance Needs

Even the most inclusive master condo policy doesn’t provide complete insurance coverage needed by a condo unit owner. A condo owner will need coverage to protect personal possessions and provide liability coverage for the space inside the unit. Additionally, if you’re still paying for your condo, mortgage lenders will likely require you to purchase an HO-6 policy. This coverage is called condo insurance (also called an HO-6 policy). Learning the details of your master policy provides you with an excellent starting point when seeking condo insurance. Here are some questions to consider when purchasing condo unit insurance.

  • Does your condo master policy cover fixtures or appliances?
  • What coverage gaps are left by your master condo insurance policy
  • Have you remodeled or updated your unit?
  • What type of deductible can you afford in the event of a covered claim?
  • Do you own outdoor structures (like a storage shed) that you only use?
  • Are you prepared to pay additional expenses out-of-pocket if a covered event deems your condo uninhabitable?
  • Have you taken inventory of your possessions?
  • Do you have pets?
  • Are you in a high-risk area for floods or earthquakes? (You might need additional coverage.)
  • Do you operate a home business from your condo?

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.

Condo Unit Insurance vs Master Insurance Policy - Infographics Photo

Top 5 FAQs About Condo Master Insurance

Should my condo master policy cover replacement cost or market value?

Replacement cost provides coverage for the replacement or complete repair cost of damages that occur due to a covered incident. Market value only provides coverage for the current market value of the items you’re trying to replace. Condo master policies offer both options, but replacement cost provides more comprehensive coverage.

Does the condo master policy cover liability?

Your condo master insurance policy provides liability coverage for covered accidents that occur in common areas. However, if a visitor is injured inside your unit, you’re responsible for the cost. This is why condo owner’s insurance is essential.

Who pays the monthly premium for condo master insurance?

Condo unit owners are subject to monthly HOA fees. Part of this payment typically goes to pay for the condo master policy.

How do I determine how much personal condo insurance I need?

After learning what’s covered in the master condo policy and determining your risks by answering the questions listed above, you’ll need to determine your personal possessions’ replacement value and any upgrades made to your unit. Create a list of your possessions and the replacement value of these items. Discuss the coverage you need with your independent insurance advisor and ask for advice about additional coverage you might need to cover any gaps.

How often should the condo master policy be updated?

It’s a great idea to meet with your insurance agent every year to discuss changes that occur within the building and ensure you have adequate coverage. Additionally, if repairs or upgrades are made to the condominium complex, you may need to re-evaluate your insurance coverage. Typically, upgrades add value, and if your insurance coverage isn’t adjusted to reflect the improvements, you could be paying for repairs out-of-pocket when damage occurs.

How an Insurance Agent Can Help

Working with a reputable insurance agent is a smart way for unit owners to understand best 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 great 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 each policy’s differences and help you 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 various personal and commercial coverage needs. Let’s connect and take this next step together!

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