Condominium Insurance: The Policies You Need

Condominium associations are responsible for insuring the shared elements and more of their properties. From structural protection to liability coverage, having the right commercial insurance policies is critical to safeguarding the association and its members. 

Read on to hear from John Carroll, commercial staff underwriter at Central Insurance, as he explains why condominium insurance is essential for your association and what policies are necessary to prevent future issues.

Essential Condominium Insurance Policies for Condo Associations

“Condominium insurance protects, among other things, the exterior structure of condo units and common areas managed by the association. This coverage is for both property and liability risks,” Carroll explains. “In a condo setup, owners often hold ownership of only their unit’s interior, while the association is responsible for maintaining and insuring the exterior and shared spaces.”

Condo associations must have the right insurance policies to protect their property, board members, and residents. However, it all begins with creating the condominium association agreement, which defines the responsibilities for various property risks of the unit owners and association.

The condo board should be familiar with their state’s condo acts to determine statutory obligations and liabilities. Then you can secure the appropriate insurance coverage critical to your interests. 

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The Master Property Policy Affects Condominium Insurance Coverage

The condominium association’s master policy is designed to cover the exposures or financial and statutory obligations the association is responsible for, often the exterior portions of the building and the grounds. The condominium association agreement outlines the specifics of this in detail.

Carroll highlights the three main types of association responsibility requiring property coverage:

• Bare Walls-In: The association insures the inside and outside of the building up to the bare walls (i.e., drywall or subfloor) of each unit, including any common areas of the building used by all residents. The coverage this offers to individual unit owners is limited, and they are responsible for insuring everything inside their unit, including items like built-ins, fixtures, appliances, and personal belongings.

• Single Entity: The association is responsible for insuring the building and each unit back to its original condition of construction. The unit owner is responsible for any improvements or betterments made to the unit since the original construction. These improvements include items such as new appliances, built-ins, flooring, lighting fixtures, etc., and the owner will need to carry adequate limits to replace these items and their personal belongings.

• All-In: The association insures the inside and outside of the building and each unit back to its pre-loss condition, including any additions, alterations, and improvements the owner has made to the unit. All-In is the most inclusive association responsibility, and only requires the unit owner to insure their contents and belongings in the unit, much like an apartment complex.

The type of master policy your association selects determines what condo unit owners are responsible for insuring through their individual policies.

General Liability Insurance Covers Common Areas

Condo associations face liability risks related to common areas such as pools, playgrounds, and walking paths. General liability insurance can cover claims arising from bodily injury or property damage occurring in these shared spaces, such as if a resident slips and falls on a wet surface in the lobby or a guest gets injured while using the gym facilities.

Directors & Officers (D&O) Insurance Protects Condo Board Members

With approximately 7,415,000 condo units nationwide, countless officers and board members serve on condo association boards, making decisions that affect their communities. Directors & Officers (D&O) insurance safeguards these board members from lawsuits related to mismanagement, disputes over fines, or enforcement of association rules. This coverage helps protect them from personal liability when acting in good faith.

“An additional layer of protection for your board is crime and fidelity insurance,” Carroll expands. “Since condo associations manage substantial financial transactions, this coverage can protect against losses from fraud, theft, or embezzlement by employees, board members, or third parties, ensuring the association’s funds remain secure.”

Workers’ Compensation is an Important Part of Condominium Insurance

If your condo association has employees, such as maintenance staff or security personnel, Workers’ Compensation insurance is required. Carroll highlights that this policy covers medical expenses and lost wages if an employee is injured on the job. Even if the association relies on volunteers, some states mandate coverage for volunteer-related injuries.

Risk Management Strategies for Condominium Associations

To reduce the potential for losses, your condo association should be proactive with risk management activities such as:

    • Regular property maintenance to prevent hazards.

    • Hiring insured vendors with proper liability coverage.

    • Establishing clear safety guidelines for amenities such as pools and gyms.

    • Conducting regular insurance reviews with your local, experienced Central agent.

“If a condo association lacks sufficient insurance coverage, the full claim amount may not be covered,” Carroll adds. “As a result, the remaining costs could be passed on to condo owners through a special assessment.”

The Central Difference in Condominium Insurance

At Central, we have extensive experience insuring condo associations and prioritizing financial stability. Unlike some insurers that enter the market with low rates only to withdraw a few years later, we remain committed to providing long-term, consistent coverage.

If we take on an account, we strive to maintain that relationship and offer reliable protection, ensuring condo associations have the support they need over time. By working with an experienced insurance provider like Central, your condo association can secure the right coverage that meets your unique needs.

Reach out to your Central agent today to learn more about condominium insurance and start a customized quote.