By definition, a condominium—or condo—is an apartment, house, office building, or other multiple-unit complex in which the units are individually owned. In contrast, a cooperative—or co-op—is a building owned and managed by a corporation in which shares are sold, entitling the shareholders to occupy individual units in the building.
While insurance carriers write homeowners policies for both condos and co-ops on the same form, these distinct differences in definition will entail coverage differences when obtaining a policy. This advice will help you in the purchase of condo or co-op insurance.
The differences between condos and co-ops require some differences in coverage. The main coverage line that will be different is the dwelling limit. This dwelling limit in condos and co-ops can also be listed as “additions and alterations.” In most cases, condo owners need to purchase dwelling coverage while co-op owners do not. This is mainly because condo owners have ownership in the actual property while co-op owners have ownership in shares of the overall corporation.
To continue with the discrepancy between condos and co-ops in regards to dwelling/additions and alterations coverage, make sure you check with your property manager to see what items their policy covers. Every property manager carries a master policy for general liability and property coverage for the entire building they manage.
Have the property manager break down what is covered in your unit under their policy, and what you need in order to purchase insurance for yourself. Please be warned: a property manager’s master policy will never cover a unit holder’s contents.
Make a small list of all the items in your condo or co-op, and look up the value to replace these items. This will be a very useful resource in the case of a disaster where your belongings are destroyed. If you are reading this article prior to purchasing your condo or co-op, make every purchase for the unit with your credit card so you can pull up records of exactly what you spent for everything you own. You can give this to an adjuster in the case of a claim.
Loss of use is a coverage that will reimburse you for expenses incurred after a claim that, were a direct result of the claim. For example, if a windstorm drops a tree on your unit and management needs to make repairs, loss of use coverage will reimburse you for the hotel expense you needed to incur because of the claim to your unit. This is a critical coverage to have in the case of a claim.
Many condo and co-op owners think they do not need insurance because they do not live in a house. This is very far from the truth and can be a potentially catastrophic decision to make. As soon as you have ownership of something, insurance is necessary. Make sure you protect your asset with the proper policy.
Condo and co-op buildings are a type of social arena where many people interact with one another. There have been many cases with my customers where they believe certain things are true about their insurance policy because a neighbor down the hall said so. Group consensus is never a substitute for sound advice from an insurance professional. Before making any decisions in regard to insurance, consult with your broker.
Liability insurance is just as important for the condo or co-op owner as it is for a home or even business owner. Yes, the property manager will have a general liability policy that will cover the entire building. However, if something happens in or directly outside of your unit, you will be brought in to the lawsuit and your assets will be in danger. Make sure you have proper liability limits of at least $500,000 on your policy so you can be protected.
The average insurance broker has written hundreds—if not, thousands—of condo/co-op policies. They should know the differences between the two and be able to guide you through the process seamlessly. Make sure to contact a trusted, professional broker to place your condo/co-op policy.
As you can see, condos and co-ops involve some specific caveats that are atypical on the standard homeowner’s policy. Please follow this advice and make sure you contact an insurance professional to walk you through this purchase. The peace of mind you will receive from knowing you have the right insurance coverage in the case of a disaster will allow you to sleep soundly at night.
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