All is quiet on the homefront until your dishwasher goes on the blink while you`re away, doing an all-day rinse cycle that spills down onto your floor and into the common areas of your condo building.
The evidence that something is wrong meets you at the door as you put in the key. Your feet sink into a soggy hallway carpet and hysterical cries drift up from your downstairs neighbors-vows of revenge for the interior rainshower. As for your condominium unit, let`s face it, you`ve got a mess on your hands. Kitchen tiles have buckled into the shape of penne noodles and water is ankle deep.
What could be worse? Your insurance could be inadequate.
There are two kinds of insurance involving condominiums: the association`s master policy, which insures the building in case of fire or other damage or liability, and that carried by the individual unit owner, which covers the interior and contents of his or her home. The latter is like a homeowner`s policy, but with some important differences.
”. . . With a condo you are insuring space, the interior space, more so than a building,” says Bob Lapinski, a spokesman for Allstate Insurance Co. in Northbrook. ”A home has more physical space, inside and outside, to be insured by the owner.”
A shared experience
For individual condo owners, the question that has to be answered is which portion of the condo is yours and what will be covered by the condominium association insurance plan, Lapinski says.
What is covered under your condo association`s insurance is also important.
”Every condo buyer has the right to see the certificate of insurance and the policy of the (condo) association,” says Jean Nelson, account executive at Near North Insurance Brokerage Co. ”The mortgage companies (that) the
(condo) buyers deal with look into this when the buyers are making the purchase. The mortgage companies want to know how much insurance the buildings are carrying before they agree to the loan.”
Nelson says condominium owners can learn what they are responsible for by turning to their association`s declaration. A condominium`s declaration defines the unit that you own and outlines your responsibilities as an individual owner. It also tells you what the building`s insurance plan does and doesn`t cover.
Nelson says that with the declaration in hand, the condominium owner and the insurance agent can then determine the amount of homeowner`s insurance needed and meld that coverage with what is already provided by the condominium association.
For example, individual condominium owners of one of the buildings that Near North insures, 6007 N. Sheridan Rd., need to insure their personal property such as household contents, storage locker contents, non-built-in appliances (such as refrigerators and stoves), patio doors, and heat and air conditioning units, compressors and hot water heater. Individual unit owners are also responsible for insuring any alterations or additions made to the units, including decorating (wallpaper, paneling, mirrors, window treatments or paint finishes), floor coverings, upgraded cabinets and countertops, upgraded plumbing and electrical fixtures and upgraded built-in appliances.
Individual condominium owners should also make sure that personal liability is part of their insurance plan, with provisions for any domestic help under worker`s compensation.
The costs
The cost of condo insurance is determined by the value of what the owner has to be insured, insurance professionals say. Insurance coverage can range from $50,000 to millions, depending on the value of the condominium and personal property (clothing, jewelry and furnishings).
”In some cases condo insurance may be more than renters` and less than a regular homeowner policy,” says Robin Davis, underwriter at Exchange Insurance Planners Inc. ”But it depends on what you have to be insured.”
Nelson says there is no ballpark figure on the amount of condominium insurance you need. ”Mr. Average could have $50,000 to $75,000, while someone who has many furs and jewels could be well into the millions for personal belongings alone.”
Insurance brokers say it is not necessary for individual condo owners to be insured with the same insurance company that covers the condominium building.
”Some condo owners want to be insured with the same company that insures the building, but it`s not mandatory,” says Lapinski.
William DeMille, executive vice president of J.S. James Management Co., which manages condominium buildings in and around Chicago, says it`s typical for a condo declaration to state that the building`s policies will insure the perimeter and partition walls and ceilings, through the plaster and primer only; doors through the primer only; floors through the concrete only;
original tile in the bathrooms; original cabinets and countertops; original built-in appliances (permanently attached/cannot operate freestanding, such as stoves, dishwashers and disposals); and original plumbing and electrical fixtures.
But it`s important to do more than glance over the subjects covered in your condominium declaration.
Original equipment
”Condo owners should pay close attention to the word `original` in those (condo) declarations. Some declarations make it clear that the original work is the only work that is covered by the building`s insurance,” DeMille says. ”If any remodeling or upgrading is done, the responsibility to insure that work then belongs to the individual owner.”
For example, in the case of the condominium owner`s dishwasher that ran amok, the owner would be covered under the building`s insurance if the dishwasher was the original one installed at the time the building was constructed or when it was converted into condominiums.
But depending on how the condo owner`s homeowners policy is written, if this is not the original dishwasher, the condo owner may be personally responsible for damages he failed to have covered in his individual condo insurance.
Nelson says if a leaky pipe is the reason for a flood, it then depends on what caused it to leak.
If it was wear and tear, Nelson says, this is not covered by any insurance. But if there was a sudden or accidental break in the pipe and the pipe is a common element, then the association is responsible for it.
”Much depends on the individual buildings and what they have stated in their declarations,” says DeMille. ”Some buildings` insurances may cover original appliances in their declarations, but some declarations may have no mention of this. It`s important to review your building`s declarations and then sit down with your insurance agent to get the best coverage. . . .”
In a booklet on condominium insurance, the Community Associations Institute, a non-profit organization that offers educational information to condominiums, townhouses, cooperative associations and other planned living developments, says most condo associations` policies insure all the buildings and common elements under a single package policy. These insurance policies are either done under the ”bare walls” or ”single entity” approach.
In the ”bare walls” approach, the association policy insures the basic building (walls, roof, floors, elevators), but leaves it to the individual owner to insure items such as appliances, carpeting, cabinets and wall coverings in the unit.
In the ”single entity” approach, the association policy insures more than the basic building. It also insures those items within the owner`s unit such as appliances, cabinets, carpeting and wall coverings. But individual condo declarations often state that these items must be original to the building to qualify for coverage.
The institute`s guidebook on condo insurance says that because absentee ownership is often part of condo ownership, this area should be explored when looking into insurance.
For example, if you own a condominium and rent it out, special insurance arrangements can be made to fit the owner`s needs. In this case, the personal property limits would be dropped to a lower level to cover those items remaining in the unit that you own. It would then be up to the renter to get renter`s insurance to cover his or her personal belongings.
It`s also possible to make sure your policy covers loss of rents or fair rental value.
Fires and floods are two topics most often on the minds of condominium owners, and both of these areas are covered in the declaration of individual condominiums.
”Most declarations state that the insurance the building has is responsible for replacing a (condo) unit to its original condition after a fire,” says Palma Paolillo, director of residential facility management at Venterra Sales and Management Co. in Chicago, which manages condominium and townhouse associations. ”But this does not include any improvements that the owner may have made. If improvements were made by the owner, then they should be covered under the owner`s policy.”
Davis, of Exchange Insurance Planners, says it`s important for condo owners to bear some of the ”information” burden when seeking insurance because not all insurance agents are familiar with the ”ins and outs” of what should be covered in condominium insurance in a particular building.
”There are similarities between condo insurance, homeowners insurance and renters,” says Davis, who adds that about 15 percent of her business comes from condo owners. ”The condo insurance is like homeowners and renters rolled into one. The space, no matter the size, has to be insured and the belongings inside protected.”
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For further information on condominium insurance guidelines, contact the Community Associations Institute, 1630 Duke St., Alexandria, Va., 22314 or call 703-548-8600.
