When moving into a condo or renewing your condo insurance, there are several often overlooked insurance decisions that could impact you greatly should you need to make a claim. We interviewed Blanca Garcia, CISR Elite, Personal Lines Agent at Crum-Halsted Insurance & Risk Management in Geneva, IL to educate our readers on condominium insurance coverage.
Your insurance coverage needs depend on what you own, according to your condo association bylaws. In other words, your insurance begins where your association’s insurance coverage ends. The most common type of condo insurance is HO-6, for the most common type of condo ownership. In this arrangement, the unit owner owns everything attached to the walls, ceiling, and floors… envision everything from the drywall in. It is in your best interest to know your bylaws and what your out-of-pocket responsibility is if your association assesses you as a result of a claim on their insurance.
For those reasons, condo insurance is more complex than homeowners insurance. Blanca shared four pitfalls for condominium owners when making decisions about their condo insurance.
1. Missing these key coverages
Probably the biggest mistake you can make when purchasing condominium insurance is to accidentally leave off coverages that you need. Here are five coverage types that many condo owners may not realize applies to them.
Sump pump failure
I remember the first time my basement flooded due to a big rain… and my sump pump and back up battery had malfunctioned. But surely my homeowners insurance would cover the damages? Nope. This “flood” is different than an actual flood, covered by flood insurance (which we apparently also don’t have; more on that below). We would have had to separately elect to have sewer water back-up of the sump pump and drains, but my agent never warned me of this. How was I supposed to know? This example is illustrative of the entire set of insurance needs when it comes to protecting your home… that you don’t know what you don’t know. But, know that all homes have a sump pump, even if you don’t have a basement, and sewer water can back up into any drain of a condo unit.
Equipment Breakdown and Service Line
Blanca says Equipment Breakdown and Service Line coverage are others sometimes overlooked. If you have sudden and accidental damage to an appliance not caused by lightening or fire, for example, it may not be covered under other parts of the insurance. Likewise, if a city pipe leads into your unit and gets damaged (such as from a tree root), the city is not responsible to cover your damage.
Be sure your policy includes Replacement Cost of your belongings. Without this, you will get actual cash value for your property, and you won’t be able to replace things in today’s market. Replacement Cost coverage ensures you will be able to replace your items with something of like cost.
But the most important coverage that many people do not know applies to them is Loss Assessment. When a condominium association files a claim on the master insurance policy, it is likely they will create a special assessment to cover associated expenses, such as their high deductible. Here are some examples of when this could save you. Blanca strongly recommends your coverage limit on this be the maximum available to you. The additional cost is usually trivial.
Weather and Natural Disasters
Finally, make sure you understand what disasters policies cover in your area. For example, in Illinois in the Chicago suburbs, tornadoes are a covered peril. However, policies in our area do not cover earthquake and flood automatically. For either of those, you’d need a separate policy.
2. Insufficient coverage amounts
The key to getting the right coverage amounts is knowing the minimum replacement cost estimate. Crum-Halsted Insurance has a tool to determine this estimate. Their tool determines, for example, how much Dwelling coverage you need if you suffer a catastrophic loss and the insurance company has to rebuild your unit.
Even so, your agent will likely not know what to quote for one coverage in particular: Personal Property/Contents. This varies by individual/family because everyone buys items of different value. It is in your best interest to create a spreadsheet of a ballpark estimate of all the items you’d want to replace. Don’t worry about capturing every little thing. You can do this over time, prioritizing your most expensive/valuable items first. See #3 below for more on making this process easy.
The other coverage limit to keep your eye on is Building Additions and Alterations. This is for everything attached to the walls, ceilings, and floors. Blanca’s team at Crum-Halsted has a tool to estimate this as well, based on certain characteristics of your unit.
3. Improperly preparing for a claim
One way to help you estimate how much Personal Property/Contents coverage you need is to walk around your condo with a smartphone and record what you have. You might find reviewing this while sitting at your computer and making a quick spreadsheet with ballpark replacement cost estimates is easier than walking around your house with a pen and paper. Plus, you need to do this to prepare for a claim anyway. Open kitchen cabinets, closets, etc. The likelihood you’ll remember all your pots and pans, or how many shirts you have, is slim. If you are in the situation to make a claim, you’ll likely be stressed out already, and this will help ease the process tremendously. Same with your spreadsheet.
4. Not having an agent
Today, with online insurance brokers/tools, you may be tempted to collect quotes on your own. The problem with this, as I mentioned above, is that you don’t know what you don’t know. To have guidance you trust and real life examples about what each coverage means is invaluable. Plus, you’ll likely need an advocate when it comes time to file a claim. The process is not black and white, and a dedicated agent can guide you through the options prior to filing a claim, and be support when you do file a claim. Also, as mentioned above, some agents are able to estimate the coverage amounts you need really well. This is crucial if you ever have to make a claim.
Having proper insurance is as important as the investment you make in your condominium. You are protecting what matters to you most. The process isn’t clear cut, but with this bit of education plus an experienced and caring agent, you can ensure you get all the protection you need.