Owning a condominium and being a member of the association is a big investment that can potentially provide investors with some big returns over the long term. While this investment is a great opportunity, condo association owners should understand that this investment is also a big risk to take on. Owning a condominium comes with liabilities and risks that comprise a responsibility that could cost you significantly if you are not properly covered.
Every condo owner needs to consider and understand the real risk that the property could incur damages and that accidents could happen on the premise that you may be liable for. The potential disasters that can happen will far outweigh the profits you make if you are not strategically covered!
To start, what exactly is condo insurance?
Details Of Condo Insurance
In order to understand why condominium association insurance is necessary, it is important to understand what this type of insurance is and what it typically covers. One of the key factors to note is that no condo insurance plan is built the same. Every condo has its own unique traits that play into the type of coverage that is necessary. These factors include:
- Number of occupants
- Type of property
- Condition of the units
- Site history
These are only a few examples, with many more being possible, depending on your state laws and regulations.
The insurance requirements for a condominium association are often determined by the project’s master deed and condominium bylaws. Depending on the type of condominium being insured, the association and co-owners will likely have different needs and requirements for insurance, both in terms of policy limits and coverage.
For starters, every condominium association should have insurance coverage for the common items which the Association is obligated to maintain, repair, or replace under the governing documents that were signed. In addition, every condominium association should maintain liability insurance to protect the association in the event damages or injuries occur to another person or property, including the co-owners. The association should also carry director and officer (D&O) liability insurance in the event a director or officer is named in a lawsuit.
These are just some of the factors that contribute to a properly designed condo association insurance plan, see our full article on this topic for more information.
Why Condo Association Insurance Is Necessary
Regardless of the type of condominium you live in, insurance will be required to be maintained by the condominium association. This insurance is invaluable and will safeguard the association from incurring huge legal and other costs you may be obligated to under the terms of the agreements you sign with your tenants.
Without sufficient insurance, the association could incur losses that force difficult financial situations where loans may be required in order to maintain proper cash flow into the property. These types of levies can be detrimental to profitability and can strain relationships between members of the association. Additionally, associations should consider aligning maintenance responsibilities with insurance responsibilities when amending their governing documents in an effort to simplify the claims process and to avoid conflicting provisions.
With these points in mind, remember that condominium association insurance is a necessity that can both save you a ton of money when the inevitable accident occurs and help you adhere to state and federal regulations. This makes it essential to speak with a condominium association insurance expert that can help you perform the inspections and due diligence necessary to ensure you create a personalized insurance plan that covers you in the areas that count.
Work With JMG For Your Insurance Needs
JMG Insurance Agency is a full-service insurance agency. Their team takes pride in making the insurance process easy for their clients while offering professional guidance at every step along the way. Reach out today for more information.