Co-op and Condo Unit Insurance: What’s Covered What You Should Know When Shopping for a Homeowner’s Policy

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In a scene from the 1985 historical drama Out of Africa, Lord Delamare (portrayed by Michael Gough) asks the Danish writer Isak Dinesen (played by Meryl Streep) if she had insurance after her coffee farm in Africa burnt to the ground. “That’s for pessimists,” she responds.

Truthfully, most of us don’t feel that way, and know better when it comes to insurance.  It is a necessary, if tedious, part of life, and we purchase many types to protect many things, from our cars to our health to our lives (or deaths). And of course, insurance is also significant for covering a residence.

What’s Required?

Most mortgage lenders will require the purchase of a homeowner’s policy upon the purchase with financing or the refinancing of a private home. In the case of multifamily dwellings, building insurance is a requirement as well. But what about a co-op or condo unit?

The answer is, nothing. “Generally bylaws don’t require owners to carry homeowner’s insurance -- but when a mortgage is taken, the mortgagee will,” confirms Alex Seaman, Senior Vice President of HUB International, an international insurance agency. While homeowner’s insurance may not be a requirement it is strongly recommended, even if you don’t have a mortgage.

Consider the following example: Your neighbor’s bathtub overflows and damages your bathroom. Neither of you have homeowner’s coverage.  What may well happen is that neighbor will be suing neighbor. The mess to the common areas inside the walls created by the flooding would have to be repaired as well--in this case by the building, probably requiring a claim through the building’s insurance that might raise premiums and then would be passed along to everyone.  There are no winners here.

What’s Covered?

A homeowner’s policy for a co-op or condo strongly resembles a typical homeowner’s policy for a single-family home.  Seaman explains that this insurance covers three main areas.

“It covers personal liability of the owners and the owners’ family,” he says.  “Second, it also covers contents, meaning personal property, including clothing and furniture and electronics.  Third, it covers improvements and betterments, also known as additions and alterations, structural improvements to the unit.”  

Seaman went on to explain that “this is the complicated issue that most people have, because the value of the additions and alterations are any amendments done to the unit since construction of the building, which could be from any prior owner of the unit.”  It includes cabinetry, bathroom fixtures, combining of units and duplexing, any structural amendment.  

“The difference between co-op or condo unit homeowner’s insurance,” says Seaman, “is that a renter’s policy wouldn’t cover additions and alterations.”

Additional Insurances

Seaman recommends that apartment dwellers “should also consider adding certain other policies.”  They include a valuable items policy—which covers arts, jewelry, silverware and other valuables; and a personal umbrella policy, which extends liability coverage not only for your dwelling but in some cases for your automobile as well.  

According to its website, Geico, a national insurance carrier, recommends that condo and co-op dwellers consider such additions to their policies as unit assessment coverage, which pays for your share of an assessment charged to all owners as a result of a covered loss passed along from the building and water backup for damage caused by sewer or drain backups.

Interestingly, certain types of natural disasters such as fire, hurricane, hail, and lightning are listed by the Insurance Information Institute as covered by condo and co-op homeowner’s policies, but floods and earthquakes are excluded.  Insurance for floods and earthquakes is available as a separate policy for those who live in areas affected by these types of natural disasters.

Seaman says co-op and condo homeowner’s policies are “specifically tailored to address the needs within the scope of the bylaws or proprietary lease,” which apartment dwellers in common interest communities have.  

So it’s okay to be an optimist or pessimist. But when it comes to insurance, it also pays to be a realist.

AJ Sidransky is a staff writer at The Cooperator and a published novelist.

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