Ask Eli: Avoid Gaps in Your Condo Insurance Policy

This regularly sponsored Q&A column is written by Eli Tucker, Arlington-based real estate agent and resident of Arlington. Please submit your questions by email for a response in future columns. Video summaries of some articles can be viewed on YouTube at Ask Eli, Live with John playlist. Enjoy!

Question: My homeowner’s association has an expensive primary insurance policy, but my lender requires me to purchase my own individual policy. What coverage can I get from the individual policy that the main policy does not include?

Reply: Each condo association has their own (expensive) primary insurance policy to cover common elements, but there are significant gaps between the association’s policy and what you are personally responsible for without an individual HO-6 policy. Most people look for the cheapest and fastest individual insurance policy and apply just enough coverage to meet the lender’s requirements, but it can put you at risk.

To explain the common differences between main policies and HO-6 policies (individual condo), I would like to introduce you again to Andrew Schlaffer, owner and president of the ACO insurance group. Andrew is a Master Insurance Policy Expert and has helped several local condo associations reduce costs and improve coverage since writing a column on the subject last year. If you would like to contact Andrew directly to review your association’s main policy, you can reach him at (703) 719-8008 or [email protected].

Take it Andrew …

Increase in claims, increase in coverage gaps

The condominium insurance market faces challenges that will impact homeowners in 2021. Water damage tops this list of challenges – according to the Insurance Information InstituteAbout a third of home insurance losses are caused by water damage and frost. The DMV is home to many aging condominiums that are struggling to mitigate water damage losses and their impact on insurance.

As water damage claims continue to rise and property damage costs rise, many insurance companies are starting to make changes to their coverage offerings, which can increase your exposure to risk.

Primary insurance vs individual insurance policy

Almost all major insurance policies in this area are underwritten on a single entity basis, meaning that coverage extends to general and limited common items, but also extends within individual units to luminaires. , appliances, walls, flooring and cabinets, but only for the same type. and the quality to that transmitted by the developer to the original owner.

Items not covered by the main insurance policy and which are generally not the responsibility of the association include:

  • Personal property (clothing, electronics, furniture, money, artwork, jewelry)
  • Improvements and Improvements (demonstrable improvements completed after initial transport)
  • Additional living expenses (cost of living in a temporary location, storage costs, loss of rent)
  • Personal responsibility (provides protection against personal injury or property damage claims arising from your device)
  • Loss assessment (triggered only if there is a covered cause of loss and the primary insurance policy limits are exhausted; this assessment would apply collectively to all unit owners)
  • Medical payments (no fault coverage available for injured guests in your unit)

Condo owners should purchase an individual insurance policy (HO-6), which is also required by lenders. This policy can cover the items listed above.

Review your housing coverage

Housing coverage should be included in every HO-6 policy to avoid significant out-of-pocket expenses. Many homeowner associations can hold you responsible for expenses that are within the primary policy deductible and are caused by owner action, negligence, misuse, or neglect. Due to increased losses from water damage, many insurers are increasing their deductibles, forcing homeowners to adjust their home insurance limits.

In a recent case, a condo suffering significant losses from water damage was forced by its insurer to increase the deductible on the primary insurance policy from $ 10,000 to $ 25,000. In this community, every homeowner should have at least $ 25,000 in housing coverage to compensate them for deductible expenses in the event of a claim regarding their housing. If coverage is not available, the owner will pay this expense personally or the association can put a lien on their accommodation.

Housing coverage should also include improvements and improvements made by the owner (improvements made beyond what the builder originally delivered), including those made by previous owners. Most lenders will also require at least 20% of the market value of the unit insured under this coverage.

What information to share with your insurer

You should always consult the constituting documents of the condominium association and understand the applicable legal requirements (i.e. Virginia Condominium Act) and the requirements of lenders to verify their individual responsibilities, including maintenance / repair and insurance. In addition to sharing association documents, homeowners must also provide their personal insurance agent with the following:

  • What is the main policy deductible? ($ 5,000, $ 10,000, $ 25,000)
  • What approach is used for condominium insurance coverage? (Single entity)

My recommendation for HO-6 / Other individual policies

Thanks, Andrew, I hope this helps at least a handful of readers to better protect themselves.

I find that most buyers go straight for the least resistance and cheapest premium route for their insurance coverage. Adding coverage to your existing auto insurance policy in 5-10 minutes likely means that no one has actually reviewed your association’s primary insurance policy and therefore you are risking coverage gaps. Personally, I’d rather pay a little more to know that my policies have been designed with some personal attention and revised every year for gaps. Andrew and his team can also handle this for you.

If you would like to discuss buying, selling, investing or leasing, please do not hesitate to contact me at [email protected].

If you would like an answer to a question in my weekly column or to discuss buying, selling, renting or investing, please send an email to [email protected]. To read one of my old articles, visit the blog section of my website at Call me directly at 703-539-2529.

Video summaries of some articles can be viewed on YouTube at Ask Eli, Live with John playlist.

Eli Tucker is a licensed real estate agent in Virginia, Washington DC and Maryland with RLAH Real Estate, 4040 N Fairfax Dr # 10C Arlington VA 22203. 703-390-9460.

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Justin D. O'Neill

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