Ensure You Are Insured

Generally, every condominium association has a Master Policy to cover the structures on the condominium property, not only the units, but for such things as pools, clubhouses, playgrounds, etc. But Owners should (and should be required to) have their own policy, commonly called an HO-6 Policy. (HO stands for Homeowners; the number refers to the type of policy and what it generally covers. And, yes, they are all creatively numbered like that rather than describing what the coverage is.) Regardless of the industrial sounding name, think of an HO-6 policy as like a regular homeowners policy, but for a condominium unit.

Why should you have it? While an association's Master Policy covers catastrophes such a lightening strike that opens a hole in the Unit or starts a fire, the coverage will not cover your personal articles, such as dishes, televisions, computers, etc. Unless you have an HO-6 policy you will be in a bit of trouble.

The policy itself costs only a few hundred dollars. One reason they are so inexpensive, is because the Master Policy usually overs anything attached to the Unit, even if it is clearly inside the boundaries of the Unit. Imagine tipping your condominium unit upside down. Anything that does not move, even though inside the boundaries the unit, should be covered; anything that moves won't be covered. So, for instance, wall to wall carpeting is covered, but a throw rug would not be. Cabinets are covered, but the dishes inside, not so much.

Be sure to look at your documents, usually in the Declaration, but not always, in the Insurance section for what is covered by the Master Policy. Most often even appliances, though “attached” to the Unit only by a cord, are covered as well. Better yet, your insurance agent should request a copy of the documents as it is his or her job to make sure you recovered for what an association does not cover. Be careful though, I have run into situations multiple times where agents have sold policies for much higher amounts because a fair portion of the HO-6 policy covered items already covered under the Master Policy.

When discussing what to have covered, you should look for a few things in particular because a good HO-6 policy can cover so much more than just the dishes and the throw rugs.

• Make sure it covers the replacement cost of your personal property, such as clothes, furniture, perhaps jewelry, etc.

• Ask (and get the answer in writing) if a catastrophe occurs, the Unit is damaged, and you have to move out, whether you will be covered for any condo fees assessed to the Unit. (Most associations have language that allows a board to waive fees if the unit is uninhabitable, but not all. Better to be safe than sorry.

• If you are a landlord, makes sure it covers loss of rent. And be sure the rental loss period is two years. Most are one year, but I know of at least one Association where the damages were so substantial, the repairs took about 20 months to complete, and a lot of owners were suffering a lot of losses as mortgages are not suspended when there is a loss. The bank still wants its money.

• If you run a (part-time) business from your home, make sure you have loss protection for equipment such as a copier, your laptop, etc..

• Ask if there is a reimbursement provision for necessary, temporary repair costs you might incur. (Save receipts and send them in.)

• Be aware. You may need “catastrophe insurance.” Ask if your policy covers such things as earthquakes, floods, hurricanes (New Hampshire is due. Did you know the main street in Manchester is called Elm Street is because it used to be lined with Elm trees, before the hurricane of 1939 wiped them out.) and terrorist attacks. Most likely these are not covered. You should consider getting the extra coverage.

• Make sure it covers the Association's deductible. If there is a claim for, say $50,000 for damages to your Unit, and the Association's deductible is $10,000.00 it's very possible the Board will assess the deductible to you. You then submit the deductible to your insurance company, pay your deductible, perhaps $500.00 and that's all. If your HO-6 policy does not cover it, then you have to. Ouch.

• Check and see the limit of the Master Policy coverage and then insure for more under your HO-6. This is to cover you if the Master Policy does not provide enough coverage. For instance, if someone gets hurt on the policy and sues and gets a $6,000,000.00 judgment and the Association's coverage is only $5,000,000.00, then the owners will be assessed the other $1,000,000.00. If there are 50 Units, each will have to pay $20,000.00. You should make sure you have enough coverage, as a safe rule, to cover $20,000.00 to $25,000.00 above and beyond what the Association's coverage limit it … just in case. (This is sometimes called Perils coverage.)

• If your association has a leach field and a pumping system, you should consider sewer backup coverage.

• Also, make sure your HO-6 has a personal liability coverage in case someone slips inside your Unit and gets injured.

By law, associations have to notify Owners annually of major changes to the Association's Master Policy, but most boards are volunteers and don't know they have to do this, and management companies frequently don't think to notify Owners of this change. Be safe. At the Annual Meeting each year, ask what the deductible is. If you can't go, give your proxy to someone who is going with instructions to ask. If you don't know anyone who is going, send an email to the Board or the property manager. Do something. To keep budgets from rising spectacularly, boards of directors frequently raise the deductible to keep the price of the policy down and the condo fee lower. You don't want the price of a low condo fee to be no coverage if a casualty occurs.

A few more tips:

• If you run a (part-time) business out of your Unit, talk to your accountant. You should be able to deduct at least a portion of your HO-6 policy on your taxes.

• If you rent your Unit, you may able to deduct the whole policy cost.

• Finally, get a good agent. When you get sick you go to a general practitioner. When you have cancer you go to an endocrinologist. With regard to your condominium, get one who specializes or at least has a heavy emphasis in the business in insuring condos.

There's a lot to know to protect yourself. So I tried to structure this column so you can print, take to an agent and walk through things step-by-step.

Finally, no I am not an insurance agent, and I don't get referral fees or I would likely have my daughter's college tuition account fully funded by now, I just thinks it's really important that you get proper coverage. I've seen and heard of too many problems when people are uninsured or under insured.