Condominium association insurance provides property and liability insurance for the overall owners association, whereas individual condo owners maintain separate insurance for their respective interests. Depending on the laws in the region where the condominium is located, the ownership interest of the association may vary from common areas to the entire structure, with individual condo owners only owning air space within their unit. Condominium association insurance policies will vary depending upon the extent of the association's ownership and obligations.
This type of insurance can be split into two main types of coverage: property and liability. Property coverage will insure all real and personal property owned by the association. In a condo building, the deed or Conditions, Covenants and Restrictions (CC&R) will outline exactly what is owned by the association. The association is then obligated to purchase and maintain condominium association insurance in an amount sufficient to replace the property in the event it is damaged. Insurance companies offer policies tailored to the interests of the association, and they work in concert with the unit owner policy to avoid gaps or duplication of coverage.
The condominium association's CC&R will also specify exactly what type of liability insurance and how much in limits are required. At a minimum, the condominium association insurance will consist of general liability insurance to protect against claims made by third parties injured on the premises. Condo owners will have an individual unit owner policy to protect against their individual liability incurred within their unit. As with the property policy, specialized policies should ensure the condominium association insurance does not conflict or overlap with the unit owner policy.
Condominium association insurance should also contain directors and officers (D&O) liability coverage to protect the interests of the individuals serving on the board of directors of the association. D&O policies provide peace of mind for the condo owners who volunteer to manage the association and may be personally exposed to claims by other owners.
The specialized nature of condominium association insurance means that it should be procured with the guidance of an insurance agent that specializes in condo insurance. The agent should fully understand the CC&R of the association and its insurance obligations in order to secure the proper insurance policies. Certain insurance companies specialize in condominium association insurance and provide a product that is simply modified to meet the specific needs of an association.
