Hi All, Earlier Happs submitted a post “Be Careful when Buying in Condo HOA”. This was a reply I posted. I’ve edited it a bit to include more info.
This is just my two cents and I hope it’s useful to anyone who might gain information from it.
I worked for the Commercial Dept in one of the biggie insurance companies for a while and many of the things I have seen has kept me from ever wanting to buy a condo or live in a PUD (Planned Urban Development).
What condo owners often don’t realize is that even if their unit has sustained a covered loss under the condo’s huge blanket policy, the Board of Directors may not allow it to be passed. It is solely up to the Board on whether or not they even want to submit a claim and many times they don’t. The Board is elected in and their word is the “word”. Each claim submitted causes the premium to go up, so the Board is very wary of what they submit.
Also, the premium for some of the large HOA’s is in excess of $125,000 a year. The deductible on these large policies can be as high as $25,000. So, for the person who has a fire in their kitchen or a tree smashed their window…the damage has to be over $25k for the Association’s policy to even kick in.
The most common calls we received were regarding plumbing issues; sometimes huge, but usually minimal.
1. Understand and know explicitly the terms under your Association’s blanket policy.
2. Read your CCR’s, which are basically the condo rules and regulations set by the current Board members; they are the “law” and will override even what your insurance company claim they will cover. For instance, one HOA we insured had in their CCR’s that they would not cover any damage to roofs, even though we as their insurer would cover roof loss.
3. Make sure you have your own building policy. If your HOA has a $5,000-$25,000 deductible make sure your own personal policy has a deductible that is $500-$1,000. Your own personal policy will cover the remaining deductible from the enormous Association’s one. Also, if your Board decides to not send your claim, which is their right, you won’t be scr*wed.
Most HOA insurance policies in the event you suffered a complete loss of your condo, would rebuild your walls and stop at the dry wall and put down the slab and concrete. So cabinets, flooring (Pergo, hardwood, etc) would be your responsibility; this is called a “Floor and Wall Covering Exclusion” and probably 95% of Associations have this clause in their policies.
4. Make sure you have “Loss Assessment” coverage. Many insurance companies don’t offer more than $30,000 but that bit could be huge if you are ever faced with that situation.
5. Of course, make sure you have your own personal belongings covered; computers, tv’s, and clothing; art, valuable jewelry, guns etc, would normally need their own separate policies.
6. You would be surprised at how many Associations’ don’t have earthquake insurance, because it is astronomically high and doesn’t seem to serve much purpose in San Diego. If a Condo Association were to be largely destroyed in the event of a catastrophic earthquake, you better believe there would emotionally shocking loss assessment fees and many people would find out for the first time that they and their Association didn’t have earthquake insurance. An earthquake policy is separate from the building policy.
I am not advocating one insurance company, but it is so important to understand and to have adequate coverage. Often, people want to save a buck, but skimping on your insurance really isn’t the direction to save money, just ask someone who has been through a really bad HOA loss situation.
It’s hard for me to feel bad for people who do get into bad HOA situations, because all the information and resources are available to those who don’t mind spending the hour talking to their insurers.
Keep your butt covered at all times.
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