I love surprises, but only good surprises, and I don’t want any of my clients getting a bad surprise and discover they did not have the right type or amount of insurance coverage after an Urban Fire or out of control Wildfire! This blog post describes the 5 insurance coverages every condominium owner needs to have.
When you own a condominium you need to purchase a condominium insurance policy. This policy is for both home owners, and for landlords who rent out their condos to tenants. Insurance companies call this an H06 policy.
1. Personal Property
If a major urban or wildfire destroys your home, you will need money to replace your Personal property. This includes all your home appliances, all of your furniture, all of your clothes, and everything else that you own. Remember that certain types of property like jewelry, watches, fine art, imported rugs, cameras, and high end computers have only about $500 in base coverage. If you want coverage for that $2,000 wedding ring, you better call your insurance agent and ask for additional dollar coverage to protect it in case of theft!
2. Interior Building Component Coverage
This is a type of property insurance where I discover about half of condo owners are “Underinsured”. The majority of Condo Associations make the owner responsible for replacing the interior building components after a fire, water loss or other covered peril or accident. This means the owner has to pay to rebuild the kitchen cabinets, counter tops, hard wood floors or rugs, pantry, and also the bathroom sink, shower, and floors. This also means paying for a new furnace and ducks, hot water heater, and air conditioner. Most Condominium Owners need about $50,000 or more for Building Replacement Coverage, and if you have a large or upscale Condo, you will need more, so make sure you have plenty of coverage so you’re not dipping into your savings after a fire.
3. Additional Living Expenses
The 3rd type of coverage that you have with Condo Insurance is Additional Living Expenses, which means the insurance company will pay you and your family the rental expense of living somewhere else, while your home is being cleaned or remodeled after a fire or other covered loss. It can take up to a full year to rebuild post total loss, so this is important financial coverage to have in your H06 Policy. If you live in a wildfire area and hundreds of homes are destroyed it can take up to three years to reconstruct your home. Multiply the cost monthly to rent a condo likes yours by 36 months and this is the dollar amount of coverage you need to be well insured. (If you don’t mind moving in with your relatives for a few years, then you only need minimum coverage!) If you are a landlord, use the same 36 month timeline for your “Loss of Monthly Rental Income”.
4. Loss Assessment Coverage
The 4th type of coverage is called Loss Assessment and I often find this coverage is missing or too low in many Condo Owner’ policies. Here is an example of how this coverage can protect you. Let’s say that your clubhouse was destroyed by Fire, and the building code upgrades expenses were $80,000 more than insurance coverage, Ouch! The board then issues a “Special Assessment” and demands all owners pay their share or $5,000 ($80,000/16 owners). If you have this Loss Assessment Coverage in your condominium policy, your insurance carrier will pay this bill for you! Nice.
5. Personal Liability Protection
The 5th and final coverage that you need to have in your condo policy is personal liability protection. Let’s say you were to accidentally cause a fire through one of your appliances, use of candles, or Christmas lights, and two homes adjacent to yours were damaged by the fire you started. You better have high liability coverage because your neighbors and their insurance companies will come after your bank account to pay all the reconstruction and related costs which could easily be $500,000+. I recommend a minimum of $500,000 and even better is $1,000,000 in liability coverage to protect my clients. Liability insurance also protects you if you have a dog and s/he bites someone, or if you injure someone away from the home on a bicycle, playing sports, or hitting them with a golf ball! If you injure someone, negligently, away from your home, your condo liability insurance is there to indemnify and defend you. Intentional acts are not covered, with one exception. If your children are age 13 or younger, most carriers will indemnify them for intentional acts as we don’t expect them to play by the rules!
Summary
It’s a great idea to take a video or pictures of all of your personal property and the interior building components and keep it in your safe deposit box at your bank. This way if there is a fire you can show the claims adjusters exactly what you had in terms of quality of your interior, and your personal property too.
My sincere advice to you is be proactive and call your insurance agent this week and get these 5 insurance coverages every condominium owner needs, and at the right limits to protect yourself against future gas explosions, urban or Wildfires. Global warming is heating up California and so expect more Wildfires and be prepared with excellent insurance coverage!
Please feel free to call or email me with any insurance questions.