Condo Master Policy + Condo Unit Owner = Potential Danger

The relationship between a condo master insurance policy and a condo unit owner’s insurance policy is a critical aspect of condominium ownership that should be clearly understood as they need to perfectly mesh with each other.  The potential risk of a substantial gap in coverage exists for unit owners. These two insurance policies serve different purposes and provide coverage for different aspects of condominium living.

Insurance agents MUST know how the Condominium by-laws are written and be able to pick out and understand the verbiage outlining how regime is required to insure the property and what is the responsibility of the unit owners.  If an agent is not asking about this, they do not understand condo insurance.

Let’s delve into their roles and how they complement each other:

1. Condo Master Insurance Policy:
   • The condo master insurance policy is typically purchased by the condo association or homeowners’ association (HOA) board responsible for managing and maintaining the condominium complex.
     1. While multiple other important insurance policies are part of the overall HOA solution, this will focus simply on the property and general liability of the master policy as it relates to the unit owners’ policies.
   • This policy typically covers the shared or common areas of the condominium, such as the building’s structure, roof, hallways, elevators, swimming pool, landscaping, and any communal spaces, like a clubhouse. It also provides liability coverage for accidents that may occur in these common areas.
   • The coverage requirements for the building’s structure are outlined in the regime’s Master Deed and typically categorized into two types: “bare walls-in” and “all-in”, aka “as-built”, policies. The “bare walls-in” policy covers the structure up to the unfinished interior walls, requiring individual unit owners to insure everything within those walls.  This includes A LOT of items, including cabinets, counters, sinks, bathtubs, showers, toilets, mantles, molding, lighting and plumbing fixtures, painting, carpeting, etc. The “all-in” policy, on the other hand, covers the structure as well as built-in fixtures and improvements within individual units.
     1. The difference between the 2 policies is massive and underlines the importance of understanding how the master deed tells the regime how to insure the HOA. 
   • The cost of the master insurance policy is typically covered by the condo association’s regime fees, which are distributed among unit owners as part of their monthly or annual assessments.
2. Condo Unit Owner’s Insurance Policy (HO-6):
   • The condo unit owner’s insurance policy, often referred to as an HO-6 policy, is purchased by individual condo unit owners to protect their personal property, personal liability, and any improvements or additions made within their unit.
   • It covers the interior structure of the unit, personal belongings (e.g., furniture, appliances, clothing, electronics, all kitchenware), personal liability (e.g., if something that you do in your unit causes damage to another unit, or if a guest is injured in your unit), and additional living expenses in case the unit becomes uninhabitable due to a covered loss.
   • In addition to personal property and liability coverage, HO-6 policies also include loss assessment coverage, which can help cover a portion of a special assessment levied by the condo association to cover costs related to damage in common areas that are covered by the policy and exceed the master policy’s limits.
   • The unit owner is responsible for purchasing and maintaining their HO-6 insurance policy separately from the master policy. It is essential to tailor the coverage to the specific needs of the individual unit.

In summary, the relationship between a condo master insurance policy and a condo unit owner’s insurance policy is one of complementary coverage. The master policy primarily protects the common elements and the overall structure of the condominium complex, while the unit owner’s policy safeguards the personal property, personal liability, and interior of the individual unit. Both policies are essential for comprehensive protection, and condo owners should carefully review their association’s master deed to ensure that they have the appropriate coverage in place to protect their investment and assets. Consulting with an insurance professional who understands this is highly recommended to make sure that all aspects of coverage are adequately addressed.