Homeowner Association Insurance: Part 2

Insurance is an entangling mess… that CAP Management understands. From title, worker’s compensation, liability and other types, insurance covers different scopes of the HOA so when an event occurs over the history of the property, our community is covered and able to care for the property and stay in the red.

Title insurance is an insurance policy which, depending on the policy, provides personal protection from title problems that may become known after you close your transaction. It is usually issued by a title insurance company with the purpose of ensuring an owner has title to a property as well as insuring against errors in the title search. Title insurance is considered part of the value of the property and is often borne by the purchaser and/or seller.

As for other types of insurance related to the property, each unit/lot owner should know precisely what is and what is not covered by the insurance policies carried by the association. The best way to do this is by consulting their personal insurance agent. Since each owner is required to pay his/her assessments even if his/her dwelling is uninhabitable (if, for example, a fire broke out and the unit must be mitigated and remodeled), an individual’s policy should include an “emergency shelter rider” to cover expenses incurred from such an event…and to cover his/her obligations to pay assessments.

Owners who rent their units/lots should carry rental loss insurance. Make certain you have copies of your lessee’s rental insurance policy.

Owners should notify the association of any alterations and additions their unit or lot by filling out an Architectural Form so any appropriate adjustment in the master policy can be made.

The association should carry worker’s comp insurance, though the amount varies and depends upon the association’s books. What happens if the HOA hires contractors for their common area needs? This is often the case, and your HOA regularly contracts for landscaping and similar services, so the contractor may be considered an employer of the landscaping contractor.

Most policies contain some deductible clause.  An important question is how much of the cost of an insurable event is the association prepared to assume – to reduce its premiums.  In a project having any number of separate buildings, a clause setting a deductible per building may be undesirable.  In a large high rise, unless the owners of the damaged units carry their own insurance, a single large deductible clause may cause an uproar and protestations of unfairness or even discrimination for payments for the few damaged units.

The significant take-away to remember? Insurance costs which seem expensive in the near-term may insulate owners from high costs down the road.

Sources for Part 1 and Part 2: