What is Condo Association Insurance?

Purchasing an Apartment Insurance Policy

Condo Association insurance provides a level of condominium insurance coverage chosen by members of the association. This “Master Policy” usually covers the basic structure according to the blueprints of the original building or buildings and will include coverage for the original materials only. While this can be a confusing issue regarding who insures what, the best way to think of condo association insurance is as protection for the group and its investment as a whole rather than the individual units.

How Coverage is Provided

Most condominium association insurance policies will detail very specifically what is to be covered such as “roof repair” or “flood damage to external walls only”. Due to the recently rising costs of insurance, this level of specificity is necessary to keep the rates for insurance low since it is clearly spelled out what the insurance will and will not pay for.

If there is a loss on property that is covered by the condo association insurance, how much money will be paid will be based on the type of insurance coverage purchased, typically of these three:

• Actual Cash Value (ACV) - This insurance will pay the association for the value of items or structure at the time of loss and will probably be reduced for depreciation and usage.

• Replacement Cost - Payments of this type will be based on the actual current value of replacement of the damaged item(s) up to a certain amount (such as 125% of the insurance amount).

• Guaranteed Replacement Cost - This coverage type, the most expensive of the three, guarantees that a replacement item(s) can be bought no matter what the current cost compared to the original, regardless of depreciation or prior usage of the destroyed original.

Participating in Association insurance is probably required as a condition of owning a condo unit, but should be paid for without grudging since it provides such essential protection to you, and the rest of the property that is shared by you with your neighbors.