PROPERTY COVERAGE

Your Association’s Insurance policy Property Coverage must contain the following elements

• Coverage for the buildings and units: The Act limits the association’s responsibility for coverage up to the bare walls and include the prime coat finish, bare floors, and bare ceilings to a prime coat finish of the units.

Walls, Ceilings (finished paint coat) and Floor coverings (carpet, tile, wood, or other) are not required to be covered as part of the Association’s insurance policy.

***Warning to you as a condo unit owner: This is one area where your personal coverage needs to reach out to where the Association’s coverage leaves off***

• Coverage for Common Elements: Though we can generalize as to anything a community shares as a common element the Condo Act defines specifically what is considered a common element. These elements include; fixtures located within the unfinished interior surfaces of the perimeter walls, floors, and ceilings of the individual units initially installed by the developer.

• Limited Common Elements: No these aren’t scarce resources that your neighbors picked up and hid from you, its generally considered to be structurally part of building and shared by two or more units. Such as a piece of plumbing that feeds water to or removes waste from multiple units.

• Replacement Cost: You purchased insurance to make sure that if the worst happens its covered, you’ll also want to be sure that the limit for your building coverage meets your expectations. You should be covered for the full (100%) replacement cost of the property. That means to put it back exactly the way it was before it all happened

***Word of Caution – This does not include any legal changes your town, city, county, state or other governmental agency deems necessary. To comply with current building codes you’ll need to look into Ordinance or Law coverage (see below)***

Types of Replacement Cost You Might Find

• 100% Replacement Cost: Seems a little misleading so be careful as you are only covered to 100% of the stated “agreed amount”. This “agreed amount” can be found on the property coverage declarations page, which is essentially a quick outline of the coverage in the policy. Usually within the first few pages of your policy. Make sure the amount stated is the amount needed as the stated amount is the maximum that can be claimed.

• Extended Replacement Cost: This sounds interesting and it would seem that it provides coverage in excess of the 100% replacement cost values and it does. Yet you still need to heed caution as the stated amount is the base number that the extension is added to. Usually provided at 20% to 25% higher than the 100% stated value. When available, carriers don’t charge premium on the full amount of additional coverage, usually there is a small nominal charge for the extension.
• Guaranteed Replacement Cost: Just what it sounds like. This form of coverage will replace the property regardless of the actual value stated (which in this case is usually stated for rating purposes). When you have the option to purchase Guaranteed Replacement Cost type coverage don’t rush in too quick as though this is a powerful feature there are many other considerations as you’ll see as we go.

What type of policy should I purchase for the association? Policies are written in what’s called a from this allows for better standardization and regulatory compliance within the industry. The only type of policy you should consider is:

• Special Form (All Risk) Policy: Essentially each form as its own coverages or exclusions, knowing this be sure to request a policy form that will include coverages that other policies exclude. Such as water and sewer backup through a drain and Ordinance and Law.