Blog - Condo Insurance - Coordinating coverage between Unit & Association

Condo Insurance – Coordinating Coverage Between Unit & Association

By | Personal Insurance

Condominiums are a form of ownership, NOT a type of residence. All unit owners own some property in common (the common elements) and own some property in full (the unit). This type of ownership requires pieces of your insurance program to be put together just like a puzzle.

I own and live in a condominium. How do I insure it?
Condo insurance can be confusing, so to keep this simple, we’ll break down three basic types of coverage for a unit owner:

  • Damage to the unit itself (building)
  • Damage to the contents of the unit (your personal property)
  • Damage or injuries you cause to others in connection with your residence (your personal liability)

The last two (damage to the contents and your personal liability) are generally covered under your unit owner’s homeowner’s policy (often referred to as an “HO-6” policy). That’s simple enough. What gets confusing with condos is damage to the unit. That’s what we’re focusing on in this brochure.

Why is damage to my unit an issue?
It is not so much an issue as something that requires attention, because the condo building complex is generally insured by the association, but how much of the building the association insures may vary greatly. Damage to your unit (walls, floors, etc.) needs to be coordinated with the condo association’s insurance policy to avoid gaps in coverage.

How do I know what to cover for my unit?
First, you need to know and understand what your association’s master policy covers. Your association’s declarations &/or bylaws will spell out who’s responsible for what, and what the master policy covers. Because insurance requirements differ from association to association, it’s essential that you review these documents, or contact your association directly, to determine the extent of your responsibility. You can then coordinate the association’s policy with your unit owner’s policy.

What are the options?
Generally, the association’s master policy insures the condominium buildings, as described in the declarations or bylaws, under one of three scenarios:

  • “All in”: the association covers the entire building (common elements + units + improvements made in the units over the years)
  • “Original Specifications” or “Single Entity”: the association covers the building’s common elements + units, but does not cover the improvements made in the units. Improvements must be covered by the unit owner
  • “Bare walls”: the association covers the common elements. The unit and its improvements are the unit owner’s responsibility.

Condominiums are a form of ownership, NOT a type of residence. All unit owners own some property in common (the common elements) and own some property in full (the unit). This type of ownership requires pieces of your insurance program to be put together just like a puzzle.

Is this all I need to know to insure my unit?
No. You also need to pay attention to the definition of “unit” in the bylaws, to know where the association’s responsibility ends and where the unit owner’s responsibility starts. If the unit is defined to be from the studs to the unfinished drywall, it means that even when the association is responsible for the unit, it is not responsible for wall coverings (paint or wallpaper). You are.

Can you give an example?
Sure. Let’s say your condo is “Single Entity.” Your bylaws should read that the association will insure the unit, and that you’re responsible for any improvements or betterments made to the unit over the years (by you or by previous owners). If at some point, the original laminate flooring in your condo was replaced with hard wood, you must add the cost to replace the hard wood to your unit owner’s policy (under the dwelling limit, called “Coverage A” in the HO-6). Tell your agent about any alterations, fixtures and improvements (cabinets, interior walls, flooring, countertops, etc.) to make sure you have enough.

How do I know how much to insure for?
Once you’ve determined under what scenario your association is operating (All in, Single Entity or Bare Walls), list all the improvements and alterations made by you and all previous owners. This may require some guesswork. The older the condo is, the more likely it is that improvements were made over the years. Check the definition of unit and add to your policy any finishing that is left out in the definition. Estimate a cost to replace for each line item, including material & labor.

Is there anything else I need to think about?
Yes. This brochure focuses on the real property side of condo ownership and insurance. A unit owner’s HO-6 policy is also a type of homeowner’s policy. As mentioned above, your “HO-6” provides other coverage, including for damage to your belongings, damage or injuries you cause to others, and more. In addition, because condo policies are not designed exactly like a traditional homeowners’ policy, some features are not automatically included, but can be added. Ask us about: broadening the perils covered, replacement cost coverage, water/sewer back-up, increased loss assessment, etc. (See our dedicated companion brochures “Condominium insurance: Similar but not the same as homeowners’ insurance” and “Condominium ownership: Why is Increased Loss Assessment important to unit owners”.)

Remember, making a coverage decision is yours alone; but as your independent insurance agent, I can help explain your options, answer questions and help you make an informed decision.

Part of a HOA or Community Association? Why Supplemental Loss Assessment coverage is important to you

Part of a HOA or Community Association? Why Supplemental Loss Assessment coverage is important to you.

By | Personal Insurance

Homeowners’ Associations, Community Associations, gated communities all operate with the same concept of property held in common by all the different homeowners. These “common elements” include land, playgrounds, swimming pools, tennis courts, club houses, even streets, and more. Since the association normally insures these common elements, why should you worry about it?

Q: What is a loss assessment?

A: When a claim occurs on the premises of a Homeowners’ Association (HOA) complex, it triggers the HOA’s insurance policy. In certain circumstances, your association can then turn around and seek contribution from you, as a homeowner, such as:

  • If the limits on the association’s policy were insufficient, and/or
  • To recoup the association’s deductible (which is often significant).

Q: Can you give an example?

A: Sure. Let’s say a neighborhood child playing on the property grounds gets hurt, and the parents sue the association. Since the accident occurred on the “common elements,” the association’s policy would respond. If the injuries to the child are significant, and the limits selected by the association exhausted, the association will pay the remainder of the award out of pocket, and will “assess” every homeowner a share of that expense: this is called a “loss assessment.”

Q: How likely is this to occur?

A: This can happen to any association and any homeowner. However, it is more likely to occur:

  • With severe claims,
  • When the HOA/Community Association chose lower limits/coverage in an effort to contain insurance costs and keep association fees down, and
  • For recoupment of the association’s insurance policy deductible. Increasingly, Homeowners’ associations and similar types of community housing choose policy deductibles in the thousands or tens of thousands of dollars. The portion of each claim under this amount is paid out of pocket, and can then be assessed to homeowners collectively.

Q: Are certain properties more likely to be impacted?

A: If you are located in a coastal area or one prone to hurricane or windstorms, specific deductibles can apply. They are often expressed as apercentage of the property value rather than a flat dollar amount, leading to higher out-of-pocket costs and loss assessments. Ask your association manager what the deductibles are on the association policy.

In addition, if your association offers more amenities (swimming pools in particular) that are attractive to children, and a high liability risk, the liability limit selected by the association should account for the added risk. If the association’s liability limit is too low, you are more likely to be assessed for the loss.

Q: How do I protect myself from a loss assessment?

A: The standard homeowner’s policy (traditionally referred to as an HO-3) normally provides $1,000 of loss assessment coverage. This amount can be increased easily by “endorsing” your policy with an add-on called “Supplemental Loss Assessment Coverage.”

Q: Is there anything else I should be asking for?

A: Yes. When discussing the endorsement with your independent agent, make sure you ask whether the endorsement also increases coverage for assessments due to an association deductible. Not all endorsements do.

Q: Are there any types of assessments that are not covered?

A: Loss assessment coverage works hand-in-hand with the underlying coverage, and is generally only covered if the cause of loss would be covered under your own individual homeowner’s policy. For example, if a loss for which you are assessed was a theft, and you did not purchase theft coverage under your homeowner’s policy, your loss assessment coverage would not kick in.


FAQ: What is a Personal Umbrella Policy?

By | Personal Insurance

A personal umbrella policy (PUP) is an insurance policy designed to extend the overall liability coverage provided by your auto, homeowners’, motorcycle, renters’ or condominium policy, and acts as an “umbrella” over and above these coverages. Simply stated, a PUP affords you protection against devastating claims and judgments.

Q: How does a PUP work?
A: A PUP kicks in when the limits of your primary policy (auto, home, etc.) are exhausted, subject to certain exclusions. As a result, your current assets and your future earnings are better protected.

Q: Can you really afford to be caught without an umbrella?
A: You’ve worked long and hard to get to where you are today. You own a home and a variety of personal possessions, some of which may have been expensive, and you and your family have a car or two, or maybe even three. You’ve done your duty and pinched pennies to save for retirement, all in an effort to provide for your family’s present well being, as well as its financial future and security. But, if you aren’t protected by a PUP, everything you’ve worked for could be at risk because of a single accident or lawsuit.

Q: What if an accident happens?
A: Though you try to avoid them, accidents happen. And, even though you believe you have adequate coverage under your other insurance policies, you may need more protection. Costs to cover property damage, injuries to others, legal expenses from lawsuits and related court awards could quickly exceed the limits of your policies.  If you aren’t protected by a PUP, you could be putting your house, your assets and your future earnings at risk. The following everyday examples help illustrate why you need extra protection:

  • You have a graduation party, and one of your guests (a) slips and falls, causing temporary paralysis, as well as serious head injuries, or (b) leaves the party intoxicated and is involved in an auto accident, causing serious injury to himself and others;
  • While playing recreational baseball, your errant throw strikes a nearby pedestrian in the face.  The injuries require reconstructive surgery, but still cause permanent disfigurement;
  • While reaching to pick up her cell phone, your daughter swerves across the center line, and hits an oncoming SUV. She is OK, but the accident disables the other driver, and causes serious injury to the two passengers.

Even if you have a modest income and assets, you can unexpectedly find yourself being sued because you were involved in a major auto accident or because of an unfortunate mishap on your property.

A PUP is a low-cost policy designed to protect you, your family and your future against catastrophic lawsuits and judgments.

Q: How do I know what I should do?
A: Making such a personal decision about your options is yours, and yours alone under the law. As your independent insurance agent, I can help explain these options.  Our agency’s job is to help provide you with information on these choices so that you can make informed decisions.

FAQ - Cyber Liability Insurance

FAQ – Cyber Liability Insurance

By | Personal Insurance

Q: What is cyber liability insurance?
A: Cyber liability insurance (CLI) is an innovative kind of insurance uniquely suited to address the digital era we live in, and the increasing risks and exposures confronted daily by businesses which operate online, or maintain sensitive client and customer data on their computer operating systems.

Q: Can a CLI policy be tailored to meet my company’s specific needs?
A: Absolutely! Whether you own and operate a large or small business, CLI policies can be tailored to meet the specific needs of your business, and can include one or more of these coverages:

  • Security and privacy liability
  • Privacy breach response costs, customer notification and support and credit monitoring expense
  • Privacy regulatory defense and penalties
  • Regulatory claim & audit expenses
  • Cyber terrorism & cyber extortion
  • Multimedia liability
  • Network asset protection

Q: Does my general liability insurance cover cyber liability risks and exposures?
A: Most do not provide any coverage for these exposures. While some business policies include limited cyber liability coverage, it is usually insufficient to provide adequate/comprehensive protection.

Q: What types of businesses need CLI?
A: Any business which operates a website, conducts transactions online, or stores personally identifiable information of its customers, clients and employees, such as birth dates, Social Security Numbers, credit card numbers and bank account information.

Q: Is my business liable if there is a security breach of our network?
A: Yes. Your business has a legal obligation to protect the confidential and personal information of your customers, clients and employees, which is stored on your network. Even if you hire a third party to provide protection and security, you remain liable.

Q: Are computer viruses covered by CLI?
A: Yes. It can provide coverage for business interruption if your computer system goes down due to a virus, and defense coverage if you accidentally transmit a virus to a third party. Remember, every policy is different.

Q: Is accepting online payment by credit card a cyber liability threat?
A: Yes. Storing credit card information on your computer network creates exposure, as it is subject to being either lost or stolen.

Q: If a laptop or flash drive with personal/confidential information is lost or stolen, is my business liable?
A: Yes. It is your responsibility to store customer, client and employee data securely.

Q: Is CLI right for my business?
A: Making such a decision about your options is yours — and yours alone under the law. As your independent insurance agent, I can explain these options. Our agency’s job is to help provide you with information, so you can make informed decisions.

Employment Practices Liability – Are You Protected?

Employment Practices Liability – Are You Protected?

By | Personal Insurance

Q: Are your business and its assets adequately protected?

A: It can happen to ANY business – even yours! Every day, your business, whether big or small, faces the reality of being the target of a lawsuit filed by a past, present or potential employee. You can’t monitor every aspect of an employee’s hire or termination, or every conversation taking place in the office or warehouse.  As a result, an off-color joke told in the employee lounge; an employee you had to fire; or the potential employee you chose not to hire, are all circumstances that could lead to a potential lawsuit. Even if a claim is frivolous or fraudulent, defending it can be expensive.

Q: How do I protect my business and its assets from employee related lawsuits or claims?

A: By purchasing Employment Practices Liability Insurance (“EPLI”). An EPLI policy provides coverage against claims made by past, present and potentials employees, including claims for discrimination (age, sex, race, etc.), sexual harassment, wrongful termination, and a variety of other employment related allegations.  Importantly, an EPLI policy will cover legal costs and expenses, whether your business wins or loses the suit.

Q: Aren’t these types of claims covered under my general liability policy (“GL Policy”)?

A: Claims for discrimination, wrongful termination, sexual harassment, etc., are rarely covered under a GL Policy.

Q: Why aren’t they covered under my GL Policy?

For the following reasons:

  • The majority of employment related claims aren’t “accidental”, and therefore aren’t considered an “occurrence” which triggers coverage under the GL policy;
  • “Injuries” suffered in such cases don’t constitute “bodily injury” or “personal injury” as defined in the GL Policy; and
  • Many GL Policies contain specific employment related practices exclusions for claims “arising out of or in the course of employment”.

Q: Can you provide examples of a typical claim?

A: Typical claims include allegations that an employee was fired because of age, sex, race or religion, or that he or she was harassed or required to work in a hostile environment.

Q: Would an EPLI policy cover claims made by my clients, vendors or other non-employees?

A: While some EPLI policies include “third-party” coverage, most do not. However, “third-party” coverage can be purchased for an extra premium, and covers liability for discrimination and sexual harassment claims by clients, vendors and other non-employees.

Q: Can an EPLI policy be tailored to meet the specific needs of my business?

A: Yes.

Q: What factors would affect the cost of EPLI coverage?

A: The average cost of EPLI coverage depends on:

  • The size and location of your company;
  • The type of business;
  • The number of claims and lawsuits previously filed against the company;
  • The number of employees you have; and
  • How long you have been in business.

Some additional EPLI facts and statistics*:

  • An employer is more likely to have an employment claim than a property or general liability claim;
  • Defense of an average EPLI case, through trial, costs more than $45,000;
  • The average amount paid for an out-of-court settlement is $40,000;
  • The median compensatory award in EPLI cases is $218,000;
  • 67% of employment cases that litigate result in judgments for the plaintiff;
  • 10% of awards in cases involving discrimination and wrongful termination are in excess of $1,000,000

* Society for Human Resource Center

Q: How do I know what I should do?

A: Making such a personal decision about your options is yours – and yours alone under the law.  As your professional independent agent, I can help your company craft an EPLI policy which protects those risks which are unique to you and your business. Our agency’s job is to help provide you with information on these choices so that you can make informed decisions.

We’re Independent – Just like You!

We’re Independent – Just like You!

By | Personal Insurance

Q: What do you really know about insurance?
A: Do you fully understand why you have insurance, and how it’s supposed to work? When (or if?) you read your policy, do you understand what it means? Are you familiar with insurance law? If you’re like most people, you answered no to these questions. This is one reason why you need an independent insurance agent.

Whether you’re an individual or business, buying or shopping for insurance can be unwelcome and annoying – or simply taken lightly. To take it lightly is a mistake. Why? Because insurance is there to protect your most valuable assets – you and your home, cars, business and future. The worst time to find out you don’t have the right policy and coverages is when you need them the most, AFTER you’ve suffered a loss.

Q: What is an independent insurance agent?
A: Choosing the right kind of insurance agent can make a big difference in securing the best combination of price and value to fit your needs. Essentially, there are two kinds of insurance agents. One is the “captive agent”, such as those who work for Nationwide or State Farm. A captive agent represents a single company, and can only provide you with information or access to his company’s products. The other is an independent insurance agent. Independent agents have no exclusive relationship with any one company. With an independent agent, you get choices. Why? Because an independent agent represents many insurance companies at once, and works on your behalf to find the best possible rate and coverage to fit your specific needs.

Q: What about using a “direct writer” to purchase insurance?
A: “Direct writers” (such as Geico or Safe Auto), sell directly to consumers. As with captive agents, direct writers can only provide information and access to their company’s products.

Q: What does this mean for me?
A: It means, without the experience of an independent agent to assist, inform and guide you, you’re taking on a level of risk you may not realize even exists.

Q: Why choose an independent insurance agent?
A: With an independent agent, in addition to having choices, you have the advantage of a licensed professional who will:

Evaluate and assess your individual risks and requirements;
Identify and tailor policies that are right for you;
Offer products to meet all of your insurance needs, including auto, home, business, life and flood;
Assist you when you have a claim;
Treat you like a person, and provide excellent, hands-on service.

An independent agent will help you understand what your policy actually covers, how much of a deductible to carry and how much coverage you need. When it comes to protecting your family, your assets and your future, you want to do it right, the first time!

Q: How do I know what I should do?
A: Making such a personal decision about your options is yours – and yours alone under the law. As your independent insurance agent, I can help explain these options. Our agency’s job is to help provide you with information on these choices so you can make informed decisions.

The best worst thing you own

The best worst thing you own

By | Personal Insurance

Fact: 1 In 22 Fires Is Caused By Something You Have In Your Home Right This Minute.

Laundry is a weekly chore for most of us, but did you know that clothes dryers cause around 15,500 home structure fires, 29 deaths, 400 injuries and $192 million in direct property loss each year? Most dryer fires happen in the winter, so now is the perfect time to make sure that yours is in good shape.
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