As a condo owner, you must also purchase coverage for your individual unit. Often this coverage is provided by an HO-6 Condominium Form. When purchasing condo insurance and determining how much coverage you need, it’s important to understand your condo association’s bylaws and how the bylaws affect the master policy.
Depending on what’s specified in the bylaws, the master policy’s coverage could possibly extend to the interior of each condo to include the floors, walls, ceilings and fixtures. So, for example, if you have a water leak in your unit, which damages the dry wall, you’ll need to know if the bylaws dictate that you, as the condo owner, are responsible for the dry wall repair, or if the condo association’s master policy will cover the damage.
With this in mind, you should review your condominium association’s bylaws and provide this information to your insurance agent. This will help you and your agent determine how much coverage you may need for your individual unit if you have a large loss. You should also carefully review any loss assessment coverage provided by your policy. The possibility of a loss assessment by the condo association is another unique issue for condo owners, which you’ll want to carefully consider when purchasing your own condo policy.
What is Loss Assessment Coverage?
Like most insurance policies, the condo association master policy will have coverage limits for property or liability claims. In situations where a claim exceeds the amount of coverage provided by the master policy, the condo association may issue a loss assessment to each condo owner to cover the remaining costs.
Farm Bureau Insurance condo policies in South Carolina automatically include $5,000 in loss assessment coverage for losses covered by the policy. For example, if the condo association asks each condo owner to pay a $7,500 loss assessment, your Farm Bureau Insurance policy pays up to the coverage limit of $5,000 for losses covered by the policy. You would then be responsible for paying the remaining $2,500. In today’s litigious society and as construction costs continue to climb, you may want to consider adding a loss assessment endorsement to your condo policy to offer additional protection against assessments that may be greater than the $5,000 coverage limit.
Loss Assessment Endorsement Options and Costs
Up to $25,000 in additional loss assessment coverage can be added to a condo policy by purchasing a loss assessment endorsement. Remember, a Farm Bureau Insurance condo policy automatically comes with $5,000 of loss assessment coverage. Adding this endorsement and selecting an additional $10,000 of coverage, for example, would bring the total loss assessment coverage to $15,000.
It costs very little to add loss assessment coverage to your Farm Bureau Insurance condo policy. Adding $10,000 of coverage adds $1 to the annual cost of the policy.
Don’t Forget Earthquake Coverage!
Just as homeowners policies don’t cover damage from earthquakes, a condo policy does not cover earthquake damage. Since earthquakes are not a covered loss, if you get hit with a loss assessment from the condo association due to earthquake damage, there would be no loss assessment coverage available under the Farm Bureau Insurance condo policy, even if you have added the loss assessment endorsement. To cover earthquake damage to your condo unit or from a loss assessment, you must first add an earthquake endorsement. Once earthquake coverage is in place, earthquake loss assessment coverage can then be added to the policy.
Review Your Coverage Needs with Your Agent
Hopefully, you don’t ever have to use your loss assessment coverage. However, you may find adding this endorsement and increasing the coverage limit is an inexpensive solution to unexpected financial burdens, which is a better outcome in the long run.
Review your policy and your condo association’s master policy with a Farm Bureau Insurance agent to determine how best to tailor your policy to meet your coverage needs. Your agent can explain coverage options and provide a no-obligation quote.