Understanding Condo Association Insurance Policies: What Is Covered?

When you’re thinking about purchasing a condominium, one of the key aspects to consider is the insurance coverage provided by the condo association. Understanding what a condo association insurance policy covers is crucial for both buyers and current condo owners. This article will break down the main types of residential associations, their governing documents, and what insurance policies typically cover.

Basic Definitions for Common Forms of Residential Associations

Let’s start with some basic definitions for the three most common forms of residential associations:

PUD (Planned Unit Development) or HOA (Homeowners Association)

Typically, one thinks of a “single-family home” subdivision, but a PUD can also include “zero lot line” homes such as townhomes. In a PUD association, the owner owns his lot/home, and the association owns the common elements. The main governing document is the Covenants, Conditions, and Restrictions (CCRs).

Condominium Association (COA)

Typically, COA covers multi-unit buildings, but it can also cover what is associated with “single-family” homes. In a COA, the owner is responsible for their unit, from the wall in, and is typically required to replace drywall and other elements not associated with the exterior. The owner owns his unit and a percentage of the common elements. The main governing document is the Declaration of Condominium.

Cooperative Association (Coop)

Coops can either cover multi-unit buildings or lots. In a coop, the owners receive a lease for a unit or a lot, and the coop owns everything. The main governing document is the M-master Form Lease.

The Responsibilities of Condo Associations

The responsibilities of a condominium association are defined in the Declaration of Condominium, which means the elements the association must cover often vary from one association to another. In Florida, condominium associations and coop associations are required to set aside ‘reserves’ usually done as a savings account, and there are statutory limitations on how the association can access the funds in this account.

Rooftop replacement, even if the condo unit is a separate “single-family” style building. Parking lot/road resurfacing. Building painting. Any item with a deferred maintenance cost or replacement cost over $10,000, such as clubhouse refurbishments and association-owned equipment, e.g., tractors.

Some condo associations may also cover additional items in their insurance policies, as outlined in their governing documents.

My Condo: A Case Study

My condo is a case in point. The association’s governing documents clearly outline the responsibilities and coverages. For instance, the association is responsible for roof replacement, parking lot resurfacing, and building painting. They also have a reserve fund set aside for major expenses.

Understanding Your Responsibilities

As a condo owner, it is important to understand what your insurance policy covers and what the association is responsible for. Here’s a breakdown:

Association Insurance Coverage: The association typically covers the common areas, which include the building exterior, roof, parking lots, and roads, as well as other common elements. Unit Owner’s Insurance: This usually covers the interior and personal property within the unit. The contents of the unit, such as appliances and furniture, are typically covered under the unit owner’s policy. Liability Coverage: This can include personal injury liability claims, protecting both the association and the individual unit owners.

Key Takeaways

When purchasing or staying in a condominium, it’s crucial to understand the insurance policies and responsibilities outlined in the governing documents:

The responsibilities of the association are defined in the Declaration of Condominium. Reserves need to be set aside for major maintenance and replacement costs. Your own insurance policy, along with the association’s, covers different aspects of the unit and the association’s common areas.

Knowing these details can help you make informed decisions and avoid potential disputes with the association or your neighbors.

Conclusion

A condo association insurance policy provides coverage for various aspects of the condominium building and the units themselves. By understanding the responsibilities of the association and the different types of insurance policies available, you can navigate the complexities of condo ownership more effectively.