Large policy deductibles and insufficient coverage limits are the top insurance gaps that could impact unit owners.
The primary gaps that leave owners exposed include:
- Policy Deductibles: Association deductibles can range from $10,000 up to $100,000. If damage occurs in a common area, the association passes this deductible to unit owners. Standard policies may not cover the assessment in full.
- Inadequate Loss Assessment Limits: Most standard individual condo policies (HO6) only include a baseline $1,000 in loss assessment coverage. If a unit owner’s assessed portion of a community repair or legal judgment is $15,000, the unit owner is left paying $14,000 entirely out of pocket unless the unit owner has increased their personal limits.
- Maintenance Exclusions: Regular wear and tear or building upgrades are excluded from most carriers’ loss assessment insurance.
- Interior Unit Exclusions: If the master policy is “bare walls” and the unit owner does not carry full reconstruction limits, then they are financially exposed for any additional interior rebuilding costs.
- Liability Shortfalls: If someone is severely injured in a common area (like a pool) and sues, judgments could exceed the association’s maximum liability limit. This could leave owners to pay the remaining balance through a special association assessment.
To avoid surprises, unit owners should talk to their agent to make sure they are adequately covered and be aware of any potential gaps.
The Risk Next Door: What Happens If a Neighbor Doesn’t Have Insurance
