I Thought The HOA / Condo Association’s Insurance Would Protect Me!

I don’t often post the exact same blogs on both of my blogs but this is such an important topic.

I fell compelled to sit down today before I start work and send out a warning. This urge was triggered by a telephone call from a woman whose unit was recently subjected to a deluge from a burst pipe in the walls of the condo. She stammered, “I don’t have insurance – I didn’t know I needed to get any. When … the lender … required insurance … money out of escrow … something about HO-6 …. but didn’t get it … thought the association’s insurance would cover me.”

This, of course, was not the first call ever that I received on the subject. I get at least one if not more calls or email questions through my website or blogs about what to do when there is water damage. Who pays?

In this case the woman was talking about $40,000 in damages she was facing. If the pipe burst in her unit and neighbors were also affected, that figure could triple or double.

I feel a bit like shouting from the rooftops  “HO-6 condo owners! Get covered!”

The Association’s coverage covers what the governing documents require the association to repair. Common area in a condo, yes. What is inside an owner’s unit – usually not! That means if there is a leak in the wall pipes, the association may have the obligation to fix the pipes and fix the walls, but not an obligation to replace paint, carpetting, expensive electronics, couches, flooring and other upgrades or personal property.

Sometimes I hear people whine, “But the policies don’t cover mold or water leaks so why buy one?”

Why is because if you have a burst pipe, a sewage backup, or an accidental tub overflow (because someone fell asleep in the tub – I mean who does that without drowning?), you will be sorry you had no coverage.

There is an article on my website at www.californiacondoguru.com entitled “Water, Water, Everywhere” that you should read so you know how it works.

I might also mention that the reason many insurance companies have excluded mold from coverage is because quite a few years ago a movement began where people were making substantial claims on insurance and also suing prolifically for mold damage not only to property but to person. What do insurance companies tend to do when there is a rash of claims, some greatly exaggerated? They raise premiums or cut coverage. It’s life, folks.

And, one more reason – in 99% of the cases (this may be a slight exaggeration – I have’t done a survey), mold can be avoided simply by acting fast and responsibly.  And perhaps some agent or broker or actuarialist (is that even aword?) somewhere said, “Why are we rewarding people for their inaction?”

Condo owners, get the coverage. Townhouse owners, get the coverage or whatever you can find that closely resembles the HO-6 policy.

It also includes what is called “loss assessment” coverage which will pay association assessments imposed to repair damage and you can increase the amounts. Standard loss assessment coverage included in these policies ranges from $1000-$1500. You can purchase additional coverage at very low cost.

So, if your association suffers a claim that exceeds its insurance and the board assesses to repair damages, you will be covered for all or part of that assessment too.

Don’t say no one told you. Don’t look around and see who you can sue. Don’t look for someone else to blame for your plight if you ignore this advice. It could save you considerable financial distress. And if you have the insurance and your company believes the association’s insurance should have covered it, they will duke it out with them and you will bypass all that hassle.

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