Navigating the intricacies of condominium insurance can be an overwhelming task, yet understanding the relationship between your individual HO6 policy and the association’s policy is crucial for safeguarding your investment. By comparing these two essential policies, you can uncover potential gaps in coverage and ensure comprehensive protection for your home. This knowledge not only protects your personal interests but also ensures the overall security and financial well-being of your community.
Each condominium unit requires an HO6 policy (also known as a unit owner policy). An HO6 policy is separate from the association’s insurance and is crucial in protecting unit owners’ property. It provides important coverage for items that the association’s policy does not cover. A carefully chosen HO6 policy will work alongside the association’s policy to help ensure proper coverage for your unit.
At a minimum, the association’s policy typically covers common areas, the building structure, and shared amenities. However, you may be surprised to learn that in the event of a covered loss most association policies also insure the interior of the units, including any betterments and improvements made by the owners. This is known as All-Inclusive coverage. The unit owner is responsible for covering their unit interior and improvements if the total cost to repair the damage is less than the association’s deductible. If the damage is caused by a covered peril and exceeds the association’s deductible, the association is responsible for the remaining amount.
Some association policies only cover the unit interiors to their original specifications at the time the association was deeded from the developer (Original Specifications coverage), while some do not cover unit interiors at all (Bare Walls coverage). The type of insurance that the association and unit owners are required to carry is determined by the association’s governing documents.
In addition to protecting against property damage, the association’s policy is designed to protect against liability claims and other risks affecting the community. However, the association’s liability coverage does not extend to incidents that take place in the interior of your individual unit.
Your HO6 policy is crucial for protecting what is not covered by the association’s policy. In addition to covering your unit interior at the proper amount depending on the governing documents, your HO6 is also what covers your personal property such as furniture, electronics, clothing, jewelry, and other personal belongings. Additionally, it can provide liability coverage for incidents that occur within your unit, “Loss of Use” coverage for expenses you incur while displaced from your unit as the result of a claim, and “Loss Assessment” coverage for special assessments due to covered damage to common areas.
We strongly encourage all unit owners to review the association’s insurance policy in conjunction with their individual HO6 policy. A knowledgeable insurance agent can make recommendations for a unit owner policy based on the association’s policy requirements. Your insurance agent can also help clarify any questions or concerns you may have. By doing so, you will be better equipped to safeguard your property and contribute to a secure community environment.
If you have questions about an HO6 policy or an association’s policy, feel free to contact our team today. 503.292.1580.
FNMA Compliance for Associations
