Key Points
● Many rental condominium investors do not have the correct property insurance
● Homeowner Association insurance policy only provides very limited coverage to individual units within the community
● We recommend 4 specific types of insurance coverage for investors who own condos or townhomes within an HOA
If you own a condo or townhome as an investment property, it is very important to understand the different types of insurance coverage available to you. Many real owners of these investment properties incorrectly assume that the insurance carried by the homeowner association complex extends to the individual property owners. That is not exactly correct.
Incorrectly insured condo and townhome owners have been forced to pay large amounts of money due to accidental damage to their properties. These accidents range from fire to hail damage and even personal injuries. What does this mean for Colorado condo owners, and how can you avoid the costs for accidents you can’t control?
Building Master Policy - carried by the Association
Master Insurance Policies are held by an apartment or condominium complex and insure areas such as:
● Physical structures: the complex will pay to rebuild the base of the building up to the walls, then the complex passes the liability back to the individual owners to rebuild the structure.
● Common areas: includes parking lots, playgrounds, swimming pools, etc.
● Liability: this applies to personal injury that may happen in any common area of the complex.
Below are the four insurance coverages that individual owners may purchase to extend coverage to their units.
Replacement Protection For Interior Real Property Improvements:
If the building suffers damage such as from a fire, the association would rebuild the building, but the homeowner would be responsible for any improvements to the interior of the property. This would include things like carpet, hardwood, paint, window coverings, and appliances.
Replacement Protections For Contents:
Contents covers any furnished items such as tables, beds, nightstands, etc. that you provide to your tenant. This may be optional insurance in the case you haven't furnished your property. If you do not rent your property as ‘furnished’, then you may not need this type of coverage.
Personal Liability Protection:
This is a very important type of coverage as you may be legally liable for someone's bodily injury or property damage resulting from an accident or negligence. This would also include things like a pet biting a visitor or neighbor or even a renter in the home trips and breaking their leg.
Loss Assessment Protection:
This is also a very important coverage for owners. If property repairs are needed which are not covered by the HOA master policy, and the cost exceeds the amount of money the association has, then the homeowner associations may issue a special assessment charged to homeowners for these expenses. Some common types of special assessments are when complexes have to make repairs due to storms, repaint, structure repairs, parking lot repairs, or even insurance claim payouts. These claims can be very expensive for homeowners who do not have loss assessment protection.
Please contact your insurance agent if you have not already added these policies to your insurance plans. They are usually relatively inexpensive to add to your policy but essential in protecting yourself from large unexpected costs that HOA complex insurance policies do not cover.
We at Grace Property Management are always ready and willing to help in any way we can. If you have questions about insurance policies for condominium or apartment complex owners, consider Grace Property Management a resource. Contact us at www.rentgrace.com or 303-255-1990.
